January 2024 Update: HMRC crackdown on ‘side hustles’

What was the issue?

From the 1st January 2024, HMRC has instructed that digital platforms such as Airbnb, Uber, eBay, Deliveroo, Amazon, Etsy, Fiverr and Upwork, automatically report individuals earnings to HMRC directly as part of HMRC’s crackdown to tackle tax evasion. This measure will affect digital platforms in the UK that facilitate the provision of services or the sale of goods by UK or other taxpayers. Since Covid-19 there has been a surge in people making income from ‘side hustles’, and therefore a growing number of individuals earning extra income that is not being declared.

HMRC’s automatic access is crucial in tackling tax fraud as research conducted by finder.com suggests 44% of people engaged in at least one side hustle in 2023 in the UK, and on average earn £206 a week, amounting to an extra £10,701 per annum. Previously, HMRC could only request this data on an ad-hoc basis and did not have automatic access to this information.

What is required and am I affected?

The tax threshold, or self-employed trading allowance, for extra income sits at £1,000. Failure to report income that amounts to more than £1,000 could ultimately result in tax bills and penalties.

Platforms will report directly to HMRC, narrowing the possibility for failing to report, or false reporting. HMRC has committed resources to enforce these new rules, with 24 full time staff and £36.69 million allocated.

The deadline to register for self-assessment was 5th October 2023, but you can still sign up now, with tax returns for money earned during 2022-23 must be paid by 31st January 2024. You will receive a Unique Taxpayer Reference (UTR) number upon sign-up. Failing to disclose, or wrongful disclosure can lead to penalties.

Do I need to register for self-assessment tax returns?

It is important that you understand when you are required to register for a self-assessment tax return, and be mindful of the thresholds if your business’s income should change. You will need to register for self-assessment tax if in the last tax year:

  • Your income from self-employment work was more than £1,000.
  • You got more than £2,500 from renting out property.
  • You got more than £2,500 in other untaxed income.
  • You had a P800 from HMRC saying you did not pay enough tax last year.
  • You need to prove you’re self-employed, for example, to claim Tax-Free Childcare.
  • You want to make voluntary Class 2 National Insurance payments to help you qualify for benefits.

It is crucial to maintain records of your income, and ensure you are being vigilant with reporting. If you have any questions regarding the new changes, or require any assistance in completing your tax returns use the form below to contact one of our experts.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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