It is important to record any side income accurately as HMRC is going to be able to see exactly how much income you receive when using a digital platform from 1 January 2024.
HMRC have new powers which means that anyone in the UK who makes money selling goods or services online will have their incomes recorded on the digital platform that they use and HMRC will have direct access to this.
Digital platforms include apps and websites which facilitate the provision of goods and services such as the provision of taxi and private hire services, food delivery services, freelance work, and the letting of short-term accommodation.
HMRC will have access to the digital records of businesses such as Airbnb, Fiverr, Upwork, Uber, Deliveroo, Etsy and other online businesses. The change is part of a wider plan for HMRC to monitor and review people adding to their existing income through side profits or freelancing and they will be checking tax returns to ensure the figures tally with the underlying records from the platforms themselves.
From 1 January 2025, certain UK digital platforms will be required to report information to HMRC about the income of sellers of goods and services on their platform. HMRC will then exchange the information with the other participating tax authorities for the jurisdictions where the sellers are tax resident.
Under the Organisation for Economic Co-operation and Development (OECD) rules, digital platforms in participating jurisdictions will be required to provide a copy of the information to the taxpayer to help them comply with their tax obligations.
The reporting rules for digital platforms can be seen here: Reporting rules for digital platforms – GOV.UK (www.gov.uk)
However, not all money made through a side income is considered taxable income.
That’s because you have a trading allowance of £1,000 a year in addition to the personal allowance of £12,570. To put it simply, most people selling the odd item will not exceed this limit.
Please talk to us if you have any questions about a side income and how to declare this on your tax return.
