The taxman has warned Brits that it is a myth to believe they do not need to fill in a tax return just because you have not been contacted by HMRC.
The organisation insists people cannot escape the consequences, which start with a fine of £100 fine, through ignorance of the need to complete a Self Assessment tax return.
The number of people required to provide income details has risen sharply following new rules around the declaration of money made through side hustles.
These include everything from selling unwanted items through the likes of eBay and Vinted, to renting out property via Airbnb and even, in some cases, dog walking and baby sitting.
HMRC has taken to social media to flag up when people will need to fill in a return. And it has set up a tool to help people identify for themselves when it will be necessary.
The HMRC states: “If you have additional income, for example by selling things online or renting out part of your home, check if you need to tell HMRC.
“You might need to do a tax return if you”:
* Have earned more than £1,000 through a side-hustle
* Are a self-employed delivery driver/rider
* Rent out a property
* Create online content
A link to the online tool which helps people identify if they need to fill out a return can be found here.
Since last year, online platforms have been required to report the sales of anyone who has provided a paid-for service on their websites or apps and sold at least 30 items or earned around £1,700 in 2024.
The first reports will be sent to HMRC by the end of January and will leave people unable to hide away any extra income they make from the taxman.
Fiona Fernie, a partner at accountancy firm Blick Rothenberg, said: “HMRC will compare the reports they receive with their self-assessment records to determine if online sellers have paid the correct amount of tax on the income or gains received.
“A failure to register (for self-assessment) can result in penalties of between 20 percent and 70 percent of the tax due where HMRC judges the behaviour to have been “deliberate but not concealed” plus significant interest charges where tax is paid late.”
Platforms will not report the information of anyone making sales of less than 30 items or £1,700 a year. At the same time, HMRC does not consider selling unwanted personal items casually as taxable.
John Hood, a tax dispute resolution specialist for accountancy firm Moore Kingston Smith, said: “HMRC has striven to make clear that it is not interested in people selling unwanted Christmas gifts but in professional online traders who have not reported their profits.
“There are some basic tests to check if this is a hobby or a trade with the most important one being whether the person is selling goods or services with a view to making a profit.”
He added: “People should remember that it is not too late to register for self-assessment and complete a tax return by the end of January.”
Andy Wood, an adviser at Tax Natives, an advisory firm, added: “The £1,700 or 30-item threshold is simply the point where platforms report your sales data to HMRC. It doesn’t automatically mean you owe tax or need to fill out a tax return, but it’s a great reminder to check if what you’re doing counts as taxable income.”
Dawn Register, a tax dispute resolution partner at accountancy firm BDO, told the FT there has been “a great deal of confusion around when and how people need to pay tax on extra income or gains earned through side hustles such as selling goods online or earning money through social media content”.
She suggested people use a tool HMRC has developed to help online sellers work out whether they are required to file a tax return. While people are only required to submit a tax return for the 2023-24 tax year, Register recommended anyone who had not previously filed a return for online trading income for earlier years to do so.
She said that doing so would “avert any nasty shocks later down the line”.
Angela MacDonald, HMRC’s deputy chief executive officer, said: “We cannot be clearer — if you are not trading and just occasionally sell unwanted items online — there is no tax due.”
* HMRC has created an online guide to help people understand whether they will be caught by the new online earnings tax reporting rules. Details can be found here.
