A couple of weeks ago, HMRC announced plans to tax people who make extra money on the side by buying and selling items online for a profit.
Here, an expert from debt solutions specialists PennyPlan reveals what the new rules mean and how you can stay on the right side of the law when selling items online.
Online marketplaces have become an excellent way to make extra cash, especially during the cost of living crisis, with any of us using them to sell unwanted gifts and household items we no longer need.
But now, HMRC has announced a crackdown on sellers making a profit on sites such as Vinted and eBay, leaving many to wonder how this will affect them and the additional money they rely on.
The new rules will require online marketplaces to provide earnings made by sellers, which has since been dubbed the “side hustle tax”. However, this new clampdown won’t affect sellers who are already following guidelines from HMRC on additional earnings.
The regulations state that you can earn an additional £1,000 per year in gross income on top of your regular earnings without having to inform HMRC, but anything more than this will require sellers to register as self-employed and file a tax return.
This announcement has left sellers worried about where this leaves them for the future and whether they can continue generating extra income through online marketplaces.
Chris Lenehan at PennyPlan says: “Introducing a “side hustle tax” for people who sell their unwanted items online is a setback for those trying to escape debt cycles.
“Websites such as eBay and Vinted are popular among people who previously sold their unwanted clothes at car boot sales or on social media to earn extra money.
“This is for goods that have already been purchased and are being sold for a markdown rather than for-profit purposes. For some struggling to meet the household bills, this could be the difference between falling into arrears and keeping up to date.
“And not only people selling the products will be deeply affected. A decrease in the number of people selling second-hand goods, such as clothing, will have a negative impact on low-income households who rely on them to meet their needs.
“With the current cost of living crisis and anticipated recession, the timing could not be worse.”
Three ways you can avoid being stung by the “side hustle tax”
- Look back over the sales made within the past year and add up how much money was made. You don’t need to do anything if the amount is under £1,000.
- If you have earned more than the threshold, you need to register as self-employed and submit a self-assessment tax form.
- When selling next year, keep a tally of how much you have made along the way so you can be prepared to stop at the threshold or be prepared for the next tax year.