If you have a side hustle selling old clothes on Vinted, using Etsy to sell homemade items, or renting out a room on Airbnb, then you could be liable to pay tax on your earnings. From January 2025, platforms like these will be required to report to HMRC on how much individuals are earning through them.
Daniel Fallows, Director at Gorilla Accounting, explains that you can earn up to £1,000 before deducting any expenses in a tax year (from 6 April to 5 April the following year) selling items online or operating a side hustle without having to worry about tax, as this is covered by your Trading Allowance.
But, if you make more than £1,000, you need to be aware of your tax obligations and might need to submit a Self Assessment tax return to avoid potential HMRC investigations and penalties.
So if you regularly sell goods online or take on additional work through a side hustle you could be classified as a ‘trader’, this means that you might be earning taxable income from your side hustle or business.
“Anyone who makes money from their hobbies or from selling items online could be hit with tax bills and fines unless they get their tax affairs in order.”
HMRC has guidance on selling goods and services online and if you need to pay tax, which you can read here. If you’re still unsure or only sell personal items occasionally, you can also check if you need to tell HMRC about any additional income you make through its questionnaire.
Daniel says there are lots of people who earn money from side hustles on digital platforms in the UK, this includes if you buy and sell clothes through online marketplaces, or if you work as a driver or courier as a second income, if you sell homemade crafts and seasonal bakes through social media or if you rent out a holiday home. Some of these people might not have realised they needed to submit a tax return and should use this as a reminder to check.
According to HMRC’s policy paper on the topic, these new rules will ‘support the government’s work to help taxpayers get their tax right first time, and to bear down on tax evasion’.
The change is a result of the UK signing up to the Organisation for Economic Cooperation and Development (OECD) tax rules which gives HMRC more efficient access to information about money earned through digital platforms.
HMRC hasn't announced how it intends to use this data but it is always best to think ahead when starting a side hustle and check any tax requirements. If you need support you can read more on the HMRC website or contact an accountant or tax adviser.
