HMRC cracks down on “side hustles”

His Majesty’s Revenue and Customs (HMRC), is set to intensify its scrutiny on the bank accounts of millions of individuals who earn additional income from side jobs, often referred to as side hustles. The new rules are designed to ensure that all income, including that from side hustles, is taxed correctly.

Understanding side hustles

A side hustle is an income stream derived from activities outside an individual’s primary work. The popularity of side hustles has surged recently as people seek ways to supplement their salaries amidst the escalating cost of living. The resultant rise in income has necessitated stricter reporting measures from HMRC to ensure that an increasing chunk of the UKs cash flow is not going untaxed.

Side hustles can take various forms, including selling second-hand clothes on online platforms like Etsy, working as a delivery driver for local takeaways, undertaking freelance work on sites like Fiver and Upwork, and even renting out a spare room on property rental platforms like Airbnb.

The New Tax Rules

Effective from 1st January 2024, online platforms that facilitate transactions between buyers and sellers, such as Etsy, Vinted, and eBay, are now required to report sellers’ financial details to HMRC. However, this rule only applies if the sellers’ transactions exceed a certain threshold. Digital platforms are not required to report users with fewer than 30 sales and earnings of less than £1,000 per year. This limit effectively represents a trading allowance of £1,000. Any income exceeding this threshold is liable to tax.

The Implications

These changes, which have already come into force, aim to prevent both intentional and unintentional tax evasion. This initiative follows an increase in the number of people earning money from side hustles in recent years, and HMRC’s goal is to ensure that all this income is taxed correctly.

The new rules are likely to affect individuals who rent out properties on Airbnb, lease their driveways, deliver food, or sell clothes and furniture online, provided these activities are not their main jobs. Basically, they will affect anyone who is earning money on the side.

Remember, if you have a side hustle that brings in more-than £1,000 annually, your bank details could be shared with HMRC to help them monitor your income.

If you are concerned about how these changes to HMRC’s rules over income taxation will affect you, contact JW Hinks on 0121 456 0190. Our friendly team of tax experts are happy to help.