At the start of the year, the press widely reported that people with a ‘side hustle’ selling clothes online could ‘end up paying tax on their earnings’ The reporting of this suggested that there were new tax rules, however, that is not the case. Instead what has changed is the information that HMRC will receive from digital platforms which must now notify them of income received by sellers.
From 1st January 2024, digital platforms are required to collect and disclose information and income to HMRC. This will impact those that have previously failed to declare income to HMRC, however, it is worth reminding sellers that HMRC allows for a trading allowance of £1,000, so you would only need to notify HMRC if your gross trading income exceeded this £1,000 threshold.
It should also be noted that the £1,000 limit applies to all trading income, so if you are self employed and have income of more than £1,000 then your trading allowance is used up and any income from a ‘side hustle’ must be reported to HMRC.
Normal rules apply to determine whether some one is trading, including consideration of the ‘badges of trade’.