Essential HMRC Reporting Guidelines for Your Side Hustle
What You Have to Tell HMRC About Your ‘Side Hustle’
Source: SME Magazine
Overview of New Tax Regulations
The rise of side businesses has prompted HMRC to introduce new tax rules starting from January 2025. These regulations require digital platforms to regularly report transaction data for sellers, enabling HMRC to monitor income and combat tax evasion.
Who is Affected?
- Individuals and micro-businesses trading online with income exceeding £1,000 per year.
- Includes resellers or anyone making goods for profit.
- Individuals selling second-hand items at a loss are exempt.
Important Income Threshold Clarifications
Examples to clarify taxable income:
- Example 1: Selling personal items for £6,000 at a loss does not incur tax.
- Example 2: Reselling purchased clothing at a profit of over £1,000 requires tax declaration.
- Example 3: Creating and selling homemade products exceeding £1,000 profit is subject to tax.
Key Takeaways for Side Hustlers
- Old Items are Safe: Selling personal clothing for up to £6,000 does not require tax.
- Declare Profits: Report any online sales profits exceeding £1,000 on your self-assessment.
- Submit On Time: Self-assessments must be submitted by January 31 to avoid penalties.
- Consider Tax Insurance: Legal expenses insurance may protect against mistakes in tax reporting.
- Claim Eligible Expenses: Running costs can reduce taxable income - check allowable expenses on the HMRC website.
Additional Resources
For further details, refer to the HMRC guidance on online income reporting.
