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HMRC issues £1,000 warning and says earning over that amount means potential tax return


Woman makes $19,000 thanks to party side hustle

The HMRC is warning anyone making more than £1,000 a year from side hustles, ranging from selling online to dog walking and even babysitting that they will need to fill in a tax return.

A new online guide has been published to help people understand when they need to fill in a self-assessment tax return.

The document also warns that anyone raking in more than £6,000 from the sale of a single item, such as a painting or piece of jewellery, could be liable to pay Capital Gains Tax on their profits.

New income disclosure rules introduced by the government cover a vast range of side hustles from selling through online auction sites to taxi or delivery driving, creating online content as a social media influencer, and renting out rooms on Airbnb.

It also brings in simple everyday tasks such as babysitting services offered by youngsters to gardening, dog walking and tutoring.

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The new HMRC guidance states: “You may need to tell HMRC if you receive income through an online marketplace or social media, even if you do not need to pay tax on it. This could be whether it’s your main source of income or an additional source — sometimes called a ‘side hustle’.”

It adds that income could be money, gifts or services you have received from:

* selling personal possessions

* selling goods

* providing a service

* creating online content

* renting out a property or land

HMRC operates an online checking tool at this link – https://www.gov.uk/guidance/check-if-you-need-to-tell-hmrc-about-your-income-from-online-platforms – which asks a series of basic questions about what people are selling.

This includes a question relating to the associated income and advises anyone bringing in more than £1,000 that they will need to fill in a self-assessment tax return, even if this income does not make them liable for paying income tax.

Importantly, the many online companies that support side hustles, such as eBay, Vinted, Airbnb will also be providing information to the HMRC on the earnings of customers through their accounts. These will be cross-checked against tax returns submitted by individuals.

Displeased couple paying bills over Internet

The HMRC is warning anyone making more than £1,000 a year from side hustles (Image: Getty)

Sales of personal possessions

The HMRC said these include: clothing; ornaments; kitchen equipment; table and chairs; jewellery; computers and phones.

The HMRC said: “If you’re only selling personal possessions, you’ll probably not have to pay Income Tax on these.

“However, depending on the items you sell and how much you sell them for, you may need to pay Capital Gains Tax. This applies to selling personal possessions where the item is worth more than £6,000.”

The £6,000 limit for Capital Gains Tax that applies to a single personal possession also applies to the total value of items which form a set, for example:

chess pieces

books by the same author or on the same subject

matching ornaments, such as vases or statuettes

 

Example — cash in the attic

You’re clearing out your attic and decide to sell your unwanted items using an online marketplace. It’s unlikely that you’ll need to tell HMRC about this income or pay any tax, as long as none of the items are worth more than £6,000.

 

Example — selling a personal possession for profit

You’re renovating your home and decide to sell a picture you own using an online marketplace. You bought it 5 years ago for £1,600 and you sell it at the current market value of £8,000. You may need to tell HMRC about this income, as you’ve made a gain of £6,400.

 

Selling goods

HMRC said people should be considered as a “trader” if they sell goods that you have:

bought intending to sell for a profit

made, including items you make for a hobby

Example — upcycling and selling

You upcycle second hand furniture as a hobby with the intention to resell. You sell them through an online marketplace.

You have received income through an online platform from selling goods and you may need to tell HMRC about this income.

 

Example — importing items to sell

You import cameras and accessories online from the far east and sell them on an online marketplace, making a profit.

 

Example — reselling clothes and other items

After making some money from selling unwanted clothes, you begin to buy items from car boot sales and charity shops which you then sell through online marketplaces, aiming to sell for more than you paid for them. This is something you do consistently.

 

Providing a service

You may need to tell the taxman if you earn money from providing services for others, for example:

gardening and repairs

dog walking

taxi driving

delivering food

tutoring

babysitting and nannying

hiring out equipment

 

Example — babysitting and nannying

You provide nannying and babysitting services. You use an online platform to create a profile and advertise and sell your services.

Young family managing budget

A new online guide has been published (Image: Getty)

Creating online content

You may be required to fill in a tax return form if you earn money Income, or receive and services, from making online content or promoting products online. For example:

making online videos

producing podcasts

social media influencing

 Example — social media influencing

You are a content creator and influencer with a social media channel where you review beauty products. You receive advertising income on your videos. You also receive gifts from the companies you review.

Renting out land or property through, for example, Airbnb

Land or property could be:

a room in your main home, including as a bed and breakfast

your main home

a property that is not your main home

land, for example your driveway

 Example — renting out your spare room

You rent out your spare room for short-term lets using an online platform. You receive regular payments from the online platform after your guests have checked in.

The tool to help people understand if they will need to fill in a tax return can be found here.

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