LITRG Warns of ‘Side-Hustle Time Bomb’: HMRC Must Improve Communication on New Tax Rules for Casual Sellers

Posted on July 10, 2024 by admin

The Low Income Tax Reform Group (LITRG) has urged HMRC to ramp up communications to ensure that side hustlers are aware of their obligation to file tax returns, with up to two million people potentially affected.

LITRG highlighted new online platform reporting rules, effective from January, which will require platforms like eBay, Vinted, Deliveroo, and Etsy to share sales data with HMRC for the first time. This change, referred to as a “side-hustle time bomb,” may catch many casual sellers off-guard, especially those who don’t realise they are trading or are unfamiliar with income tax and national insurance obligations.

The new rules mean that individuals earning over £1,000 from side hustles in the 2023-24 tax year must file a self-assessment tax return by 31 January 2025. LITRG warned that HMRC’s lack of publicity could lead to confusion, as platform-reported data is based on the calendar year rather than the tax year, complicating sellers’ calculations. With each platform likely to use different reporting methods, compliance may become even more challenging.

January is already HMRC’s busiest period, with long wait times for customer service. LITRG noted that HMRC’s digital assistant struggles with basic tax questions, leading many to turn to phone support or, worse, ignore their tax obligations entirely.

LITRG advised HMRC to invest in a dedicated team for online traders and proactively address potential issues. Claire Thackaberry, LITRG’s technical officer, expressed concern that without clear communication, many sellers could face chaos and confusion when the new rules take effect.

She emphasized the need for HMRC to collaborate with platforms and sellers to make tax responsibilities easy to understand before the rules come into force.

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