HMRC changes tax rules to crack down on ‘side hustles’

Digital platforms will soon share users’ information with the tax authority

From 1 January 2024, new data-sharing rules are set to come in that will force popular digital platforms to share their users’ information, including their income, with HMRC. The new rules will apply to well-known ‘side hustle’ platforms, such as Etsy, Airbnb, Deliveroo, Uber, Upwork and Fiverr.

Some websites and apps, including Airbnb, already report user income details directly to HMRC. However, once the new rules come in, data sharing will become an automatic requirement and allow the taxman to identify discrepancies between side hustle incomes and the figures quoted on tax returns.

The rise of the side hustle

A side hustle is any activity you earn money from that’s not your main job. They have become increasingly popular in the UK due to the cost of living crisis, with more people wanting to make extra cash to help them get by. They are also a legacy of the pandemic, when people had more time to explore their passions and needed to generate additional income.

There are lots of different ways people can earn extra cash. Some rent out holiday homes or spare parking spaces in garages or on their drives, while others sell handmade products via online stores. Food couriers and drivers also use platforms like Deliveroo and Uber to make extra cash, while designers, writers and other creatives can offer their services on platforms like Upwork.

What are the rules on side hustles?

The new rules will make it easier for HMRC to tax side hustles and identify those not reporting and paying what they owe. Everyone is allowed to earn £1,000 income a year (6 April to 5 April) from self-employment or property they rent out without paying tax, known as the Minimum Trading Allowance.

However, you must report and pay tax on anything you earn over the Minimum Trading Allowance. You must do that by registering and filing a self-assessment tax return and paying the Income Tax and National Insurance you owe. If you fail to do so or file your return or pay your bill late, you could receive a penalty or fine.

Catching up with the gig economy

HMRC already has the power to access data on sellers and freelancers on UK-based sites, but the new rules give it access to those same details from overseas platforms. It will also share the details with other participating tax authorities where the individual is a resident.

The tax authority is also investing over £35 million to create a specialist team of 24 tax officers. They will identify discrepancies between income on digital platforms and tax returns, launch investigations and take enforcement measures where it’s necessary.