Bury St Edmunds accountant Keith Senior, from Jacobs Allen, warns that HMRC is set to take a closer look at people’s extra online earnings

Are you one of the millions of people who have started to make additional income from a small activity that you have on top of your main income?

Many millions throughout the UK are now involved in ‘side-hustles’ as they are now commonly termed. This could be selling products or services, freelancing or even renting a room via Airbnb. It is estimated that 1 in 6 adults have a once-weekly ‘gig’ job, so that’s quite a pool of people to attack.

Well, you need to be aware that HMRC has started a new crackdown with effect from 1 January 2024 to check up on how much income people make from such activities, where they use digital platforms. HMRC has engaged with some of the main digital platforms such as Airbnb, Fiverr, Upwork, Deliveroo, and Etsy, to require them to report to HMRC how much money is made by people using those platforms. Those platforms must comply. This is HMRC using existing legislation to require financial information from third parties about individual taxpayers’ activities but is an extension of what has been source information up to now.

We’ve said before that HMRC’s information gathering powers and automated analysis of data is very impressive and this will add to that core data to allow more insight into checking what income people earn.

Essentially, HMRC plans to compare this reported information with that shown on a taxpayer’s annual self-assessment tax return, or where such self-assessment return has not been made. This will lead to an expected significant increase in HMRC enquiries of taxpayers and a commensurate increase in the amount collected in tax, interest and penalties for incorrectly supplied information on taxpayers’ returns. They are employing a team of 24 individuals full time on this targeted campaign and are investing some £37 million, so they expect a multiple of that in results.

There is a current ‘Minimum Trading Allowance’ for any taxpayer to earn up to £1,000 from such alternative activities and not declare it or pay tax on it. However, once the income goes to more than this £1,000, the full amount is taxable if not covered by the personal allowance. That is what HMRC is targeting and where they expect to raise a significant amount of money.

The simple answer of course is to always report fully and openly on what income you make, and in so doing you cannot be caught by HMRC, but that doesn’t stop them from checking your figures and asking questions if there is a perceived discrepancy. So please be diligent at keeping good records of whatever income you earn and related expenses, and make sure that you fulfil your responsibilities of reporting it if required.

-- Keith Senior, Director, Jacobs Allen Chartered Accountants