Blogging Tips: Reporting Side Hustle Income to HMRC (Vinted, eBay)

I'm sure many of you have a side hustle. Whether it's selling your old suits on eBay, renting out your spare room on AirBnB, or charging your Mum for cutting the laurels in her backyard. Naturally you'd want to do the latter for free, but hey, time is money and it's bloody cold out there.

But the latest news that the Government are clamping down on taxing people's side hustle revenues sent shivers down my spine. I did some quiet digging and wanted to get to the bottom of what the law actually means, and whether it applies to me.

Starting on Monday 1 January, so-called "digital platforms" now have to collect extra information about sellers, including – crucially – how many sales they've made and how much income they've generated. These firms such as eBay, Vinted, Uber etc will soon start pass on information about you to HM Revenue & Customs (HMRC).

What qualifies as a Digital Platform? 

A digital platform is any "app, website or other type of software that connects sellers to the consumers of their goods and services", meaning lots of popular sites and apps are covered. They are doing this in the same way they are doing with Crypto, they made all of the Crypto exchanges pass over information on people that had accounts with them.

They are now getting companies who offer and render services to sign up so that they have to report what they are paying people. This includes Bank Account details, so that they can cross check that against their self assessments on a year to year basis.

If you list rental properties on AirBnb this is going to affect you. If you make logos on Fiverr, this is going to affect you. This is part of a global clamp down on tax evasion, people that make extra cash on top of their main income will be ordered to give HMRC users information. 28 companies have signed up (probably more at the time of writing). It will be also implemented internationally so other people that have their companies registered abroad will be affected.

Good news for AirBnb though

Renting out part of your home to a lodger? You may be able to earn up to £7,500 tax-free under the 'rent a room' scheme.

You do have some Tax Allowances

If you're earning below a £1,000 in your side hustle you don't have to declare anything. You're in the clear. If you have a side hustle, even Etsy, the minute you cross £1,000 you have to start paying cash.

Why on earth are they coming after normal people eh? It's important to note that the rules around who pays tax on earnings made from digital platforms have NOT changed. If you didn't owe any tax on these earnings before, and you continue to use these platforms the same way, you won't have to start paying tax on them now.

They started to report people using Only Fans last year that were making an income. So this was definitely coming. 

HMRC have invested money into computing systems over the past couple of years. They are developing software that will investigate your accounts to see if what you're making and what you're declaring tallies up. If the earnings were solely from selling goods online, the key question is whether or not you're considered to be "trading". In a nutshell, if you make or buy goods with the intention of selling them, you're probably a trader – and you therefore need to declare your income to HMRC through self-assessment.

For example, if you're buying cars, doing them up and then reselling them for more than you bought it for, this would be considered trading (unless it was a one-off). But if you clearing out unwanted Xmas presents, you wouldn't be trading.

What if I declare ignorance or stupidity? 

Ultimately though its not HMRC's responsibility to tell you that you should be paying tax on your side hustle. It's down to you to figure it out. So please keep a track on what you're doing, keep accurate records and don't cut corners. 

Oh god what about YouTube? 

Yes this is a digital platform, considered a side hustle, so declare it. If you have underreported, and you're making over £60k a year then you might want to have a limited company. If you're not then you should be a sole trader. They are after the small guys. It's easier to take the likes of us on and squash us than it is to go against the big wealthy conglomerates and their rock and roll lawyers. 

HMRC are everywhere

If you don't have a UTR number you have to sign up to self-assessment to get a UTR number. 

A Tax year in the UK runs from 6th of April each year to the 5th of April the next year. The official deadline to register is 5th October. If you don't submit on time you could receive penalties from HMRC.