Will I have to pay ‘side hustle tax’ when I sell items online?
16 January 2024
02 February 2024
A change in rules for digital platforms like Vinted, eBay and Depop means they will start to report your earnings to HM Revenue & Customs (HMRC) if you sell more than a certain amount. So will you need to pay tax? Here’s what you need to know.
What is the online selling law change?
The law is the same, but it’s a crackdown on people who should already be paying tax. These companies are just being told they now have to share information with HMRC.
While it’s been nicknamed the “side hustle tax”, it isn’t a new tax. It’s just the same income tax you’d pay on any other job. So if you didn’t owe any tax on this income before, and you continue to use online platforms the same way, you won’t have to start paying tax on them now.
The change is part of new rules that came into effect at the start of 2024 that the UK agreed to follow as part of the Organisation for Economic Cooperation and Development (OECD).
HMRC can already request this information from UK-based companies if they think you’re not paying the tax you should. But now this applies to digital platforms based outside the UK too.
Platforms have to comply by January 2025, but they could start sharing this information from now on.
Will these apps and websites send everyone’s information to HMRC?
No. The reporting rule only applies to accounts that sell more than 30 items a year or who turn over more than 2,000 euros (currently around £1,735).
Do I still need to pay tax if I’m selling my old stuff?
If you’re genuinely selling your own possessions, it’s unlikely you will need to declare your earnings and pay tax.
If you’re buying things for the sake of selling them at a profit, then you’re likely ‘trading’ and you might owe tax on what you make.
You will need to tell the HMRC if:
you sell more than the ‘Trading Allowance’ of £1,000 (before deducting expenses).
sell a personal item for £6,000 or more, in which case you may be liable for Capital Gains TaxOpens in a new window
If you’re uncertain, you can check HMRC's online calculatorOpens in a new window to work out if you need to tell it about income made from online sales.
What is the Trading Allowance?
All sellers are granted a £1,000 tax-free allowance for ‘trading income’. So if all your trading income is below this threshold, you won’t need to tell HMRC and fill in a Self Assessment tax return.
For example, if you’ve sold a pair of unwanted shoes for £50 and bought some games from a car boot and resold them for profit for £100, then the total of your trading and casual income is £150.
Only £100 of this money would count towards your Trading Allowance limit of £1,000, so you wouldn’t need to tell HMRC. However, if you sell items worth more than £1,000 over the year, you will need to tell HMRC by registering for Self Assessment. So it’s a good idea to keep track of how much you’re earning, and if you think your income is over £1,000 contact the HMRC for advice.
And don’t worry - just because you register for Self Assessment, it doesn’t necessarily mean you’ll owe tax to HMRC. What’s known as your personal tax allowance means you can earn £12,570 a year before you must pay any tax.
What is your personal tax allowance?
Your personal tax allowance is the amount of tax-free income you can have in a year. It’s currently £12,570. You only pay tax on any income you receive over this amount.
Your allowance might be more if you qualify for the Blind Person’s AllowanceOpens in a new window or are married. The Marriage Allowance allowsOpens in a new window you to transfer £1,260 of your personal allowance to your husband, wife or civil partner. You can find out more about how it works on the government website.
Do I need to pay tax on earnings from property platforms like Airbnb and VRBO?
It’s important to know that you can get up to £1,000 each tax year in tax-free allowances for property income and trading incomeOpens in a new window If you have both types of income, you’ll get a £1,000 allowance for each.
So if the property you host on an online platform like Airbnb is a second property or a property that you don’t live in, you can earn up to £1,000 tax-free each year. But just like with selling online, if your income from letting your property is more than £1,000, you must register for Self Assessment.
Any income from rent over that amount might be taxable rental income and subject to Income TaxOpens in a new window The amount of Income Tax you pay is based on your income band. So if you don’t earn any other income, you pay no tax on the first £12,570.
These new rules do not affect the Rent a Room allowance if you’re letting out a room that’s part of your main home. You can find out more about Rent and Room and how it worksOpens in a new window on the government website.
What is Self Assessment?
Self Assessment is a system HMRC uses to collect Income Tax.
Tax is usually deducted automatically from wages and pensions. People and businesses with other income and support payments must report it in a tax return. If you receive income of more than £1,000 a year you need to send a Self Assessment tax return.
When should I apply for Self Assessment by?
If you do need to file a Self Assessment tax return you can do so online or by post.
You should register by the 5 October after the end of the tax year you started earning self employed income.
The deadline for filing a paper return is the next 31 October or 31 January if you’re doing it online.
You'll need to register for Self-AssessmentOpens in a new window on the HMRC website, so you can be sent your unique taxpayer reference (UTR). If you've filed a return previously, you should already be registered.
If it's your first time filing your tax return online, you'll also need to set up an online account and be sent an activation code.
This can take a while to receive, so if it's the first time you're completing a self-assessment, make sure you register online immediately and ask HMRC for advice.
Deadlines for paying tax you owe
You need to pay the tax you oweOpens in a new window by midnight 31 January 2024. There’s usually a second payment deadline of 31 July if you make advance payments towards your bill (known as ‘payments on accountOpens in a new window’). You’ll usually pay a penaltyOpens in a new window if you’re late. You can appeal against a penaltyOpens in a new window
What should I do if I’m late applying for Self Assessment or filling out my tax return?
You’ll get a penalty if you need to send a tax returnOpens in a new window and you miss the deadline for submitting it or paying your bill.
You’ll pay a late filing penalty of £100 if your tax return is up to 3 months late. You’ll have to pay more if it’s later, or if you pay your tax billOpens in a new window late. You’ll be charged interest on late payments. You can appeal against a penaltyOpens in a new window if you have a reasonable excuse.
Find out more about Self Assessment in our guide.