The government and HMRC have announced stricter tax policies on “side hustle” apps that could affect those looking to earn an extra income during this cost of living crisis.
Unveiling Stricter Oversight for Side Hustle Giants
HMRC has ushered in stringent regulations affecting major “side hustle” platforms such as eBay, Vinted, Airbnb, Fiverr, Upwork, Uber, Deliveroo, and Etsy. These platforms are now mandated to meticulously record and promptly report income generated through their services.
This groundbreaking initiative enables HMRC to cross-reference and scrutinize the data against individual self-assessment reports.
Investment and Manpower for Effective Implementation
HMRC’s commitment to enforcing these measures is underscored by an investment of approximately £37 million and the recruitment of 24 full-time staff. The objective is crystal clear: to identify any irregularities or suspicions of tax avoidance, thereby initiating investigations when necessary.
This crackdown aligns with a broader strategy targeting individuals who may be under-reporting or completely neglecting their earnings from side hustles, freelancing, and self-employment.
Decoding the Trading Allowance
Navigating the intricacies of UK tax regulations, individuals are granted a Trading Allowance, allowing them to earn £1,000 in additional income per tax year alongside their primary employment. However, earnings surpassing this threshold necessitate individuals to register as self-employed and fulfil tax obligations on the additional income.
HMRC asserted that these rules are not punitive but rather aim to assist online sellers in adhering to tax obligations from the outset. Simultaneously, the regulations are a powerful tool for detecting any intentional non-compliance, ensuring an equitable environment for all taxpayers. Even those falling below the £1,000 threshold are encouraged to maintain records, fostering a culture of transparency.
Direct Reporting Mandate and Platform Dynamics
The regulatory mandate requires online platforms to directly report seller information to HMRC, with this requirement set to take effect at the conclusion of January 2025.
Adam Jay, Vinted’s CEO, reassured that these rules will minimally impact the platform’s sellers. He clarifies that only a fraction of users would trigger the reporting threshold, “It’s actually quite a small proportion of users of our platform who will trigger this threshold where we need to provide information,” he said, “It’s only those people who are making a profit from selling second-hand items that might be eligible for tax and then it’s about their own personal tax situation what tax would ultimately be due to HMRC.”
Public Sentiment and Skepticism
While the measures represent a bold attempt to tackle tax evasion, they have elicited criticism online, with users deeming the rules as unjust.
Concerns centre around the potential negative impact on low-income sellers relying on platforms like Depop and Vinted. Critics argue that during a cost-of-living crisis, taxing sellers engaged in second-hand item transactions is misplaced, advocating for a more targeted approach focused on high-income earners.
Tax experts underscore the importance of proactive engagement by individuals anticipating earnings surpassing the £1,000 trading allowance. Early communication with tax authorities is recommended to address tax obligations and mitigate the risk of penalties.
The emphasis remains on encouraging self-reporting and fostering responsible tax practices.
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The post Tax Policies Get Strict on Side Hustles, Despite Cost of Living Crisis first appeared on Edge Media.
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