Essential Guide to Paying Taxes on Your Side Hustle: What You Need to Know

Understanding Tax Obligations for Side Hustles

Source: Do you need to pay tax on your side hustle?

Key Information from HMRC

• The HMRC has introduced a new tool aimed at helping online influencers and side hustlers comprehend their tax requirements.
• Individuals may have to report income from various sources, including selling personal goods, providing services, creating online content, or renting out property.

New Reporting Rules

• Starting January 2024, digital platforms are mandated to report user income data to HMRC.
• The first reports are expected by January 31, 2025.

Expert Insight

• Dawn Register from BDO emphasizes that while tax rules on income or capital gains remain unchanged, confusion persists about filing returns for extra income from side hustles.
• The HMRC tool can aid in clarifying if a tax return is necessary and how to declare earnings.

Recommendations for Side Hustlers

• Those selling online should stay informed regarding the new reporting requirements, with a deadline for digital platforms approaching.
• Historically unreported income may lead to HMRC inquiries about prior tax years, so it’s advisable to regularize past tax matters.
• Anyone owing back taxes may incur late fees and penalties, currently set at 7.25% interest.

Conclusion

Side hustlers are encouraged to utilize the HMRC’s new tool and stay updated on evolving tax obligations to avoid penalties and ensure compliance.