HMRC criticised for not creating better awareness of new side hustle rules

Last month, online sellers were reminded to keep on top of their tax affairs following the new ‘side hustle tax’ rules that came into play at the start of the year.

On the 1^st of January 2024, new rules meant that online platforms, such as eBay, Vinted, Uber and Deliveroo, must start collecting and sending information to HMRC and the individual by the 31^st of January 2025.

The Low Incomes Tax Reform Group (LITRG) has raised concerns that HMRC hasn’t done enough to make sellers aware of their tax liabilities, which could in turn cause chaos for taxpayers when the first reports are sent to HMRC and sellers in the New Year.

In HMRC’s own impact assessment, up to 5 million ‘businesses who provide their services via digital platforms’ – including the self-employed – could be affected by these new reporting rules.

In the LITRG’s new paper, ‘Online Platforms – the changing landscape for the self-employed’, it expressed the following concerns:

• Sellers receiving information on their activities from platforms based on a calendar year of activity, not by tax year, making it harder to understand and calculate when tax may be due.
• The lack of a standard reporting format, meaning sellers could receive different forms from different online platforms.
• Reports being produced during one of HMRC’s busiest times of the year, when it can be hardest to access help. LITRG is concerned that sellers could ignore the information, creating problems further down the line.

Claire Thackaberry, LITRG Technical Officer, said, “There are just over three months to go until HMRC starts getting information about the income and activities of people who use online platforms to make money. We are concerned that we will see the same chaos and confusion that arose when the rules first came into effect.

“Time is running out for HMRC to defuse this ticking time bomb.

“The information that HMRC will receive from platforms will be presented by calendar year, therefore covering more than one tax year. This could make it more difficult to work out when tax is due. Many people will turn to HMRC for help. However, January is an extremely busy time for HMRC ahead of the self-assessment tax return deadline and this will make it harder to speak with someone.

“Our concern is that people will either do nothing with the information they have been given or use it incorrectly, storing up problems for the future. HMRC needs to work with platforms and sellers to make this information as clear and easy to digest as possible so that people can comply with their tax responsibilities.

“It is in no one’s interest for sellers to be non-compliant. Failing to pay the tax that is due threatens livelihoods and can impact HMRC’s ‘tax gap’, which is the difference between the amount HMRC expects to raise and the amount it actually gets.”

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