We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA
HMRC is targeting individuals who are earning extra money on the side to make sure they are paying tax on their income.
HMRC is currently writing to individuals who may have tax to pay on online marketplace sales made in earlier tax years.
Anyone generating more than £1,000 from their side hustle may need to complete a Self-Assessment tax return and should check their tax obligations using HMRC’s guide, published as part of the latest Help for Hustles campaign.
HMRC reports that around one in ten British citizens are operating in what it calls the ‘hidden economy’, with 65% of these individuals ‘most likely operating side hustles and largely unaware that they should be registered for tax’. Unpaid tax from the hidden economy accounted for about £2.2bn in the 2022/23 tax year according to HMRC.
The HMRC guide covers five key areas to help people understand their tax obligations:
- people buying or making things to sell
- anyone that works for themselves doing multiple jobs
- content creators or influencers
- people that rent out their property
- people with a side gig.
The government is urging people that trade or sell services to check if they need to tell HMRC about additional income on the government website. However, if someone is clearing out their unwanted items and putting them up for sale, they will not need to pay tax.
HMRC targets online traders
HMRC is now writing to individuals who may have tax to pay on online sales made in 2022/23 and in earlier tax years.
The HMRC letter explains that an individual who buys or makes goods to sell at a profit is likely to be trading. Income tax may be payable on any profits from the trade depending on the circumstances. HMRC also says that capital gains tax may be due on the sale of personal items depending on the nature of the items and how much they were sold for.
However, no tax will be due where total sales are less than the £1,000 trading allowance or where the person’s total taxable income is within their personal allowance for the year.
Where an individual has income to declare, they should follow the instructions on GOV.UK or call HMRC. If they don’t have income to declare, they should contact HMRC by phone or email. In both cases, HMRC says they should take action within 30 days of the date of the letter or HMRC will open a compliance check.