New Digital Reporting Rules for Side Hustles

Last July 2023, the UK Government introduced regulations that will require digital platforms to report the income of users to the HM Revenue and Customs (HMRC). The digital reporting process began in January 2024, affecting platforms like Etsy, Airbnb, OnlyFans and Uber.

What do the new digital platform reporting rules mean for your side hustle? What do you need to do to ensure that you remain compliant and avoid any legal trouble? We have shared a guide to help you gain a better understanding of the regulations and answer your questions.

In the past, the HRMC was already able to request reports from digital platforms about a user’s revenue. However, the new reporting rules require these websites to collect data and submit them to the HMRC. 

What is qualified as a digital platform? A digital platform is any app, software, or website where a seller can connect to buyers and sell their products or services.

Online marketplaces are a popular type of digital platform. Delivery apps, craft websites, and freelancing applications also qualify as digital platforms. 
Through this measure, HRMC can help taxpayers pay their taxes correctly and avoid tax evasion.

The UK government established these new rules to minimise tax avoidance and evasion. This means that all people who are eligible to pay taxes in the UK are affected by these new reporting requirements.

If you meet any of the following, expect the digital platforms you’re using to report data about your earnings. 

• Ride-sharing drivers: This includes those who drive for Uber and other ride-sharing platforms, as well as private hire services and taxi drivers.

• Food delivery networks: The new rules don’t just apply to food delivery couriers. Those who sell food items through a platform are also affected. 

• Freelancers: Freelancer platforms like Upwork and Fiverr will need to report each user’s earnings. Whether you’re a virtual assistant, a graphic designer, or a web developer, the new ruling will affect you.

• Short-term accommodation lettings: People who rent their homes through platforms like Airbnb are affected by the regulation.

• Sellers of tangible goods: Online marketplaces where people sell clothing, cosmetics, materials, and other tangible products are subject to the new ruling. If you use these platforms, your earning data will be reported to HMRC.

The rule is not limited to those who are in the UK. International companies and individuals that sell to the country are still subject to the new ruling. In addition, sellers that have overseas transactions are not exempted.

Not everyone needs to pay taxes, particularly if they don’t earn the minimum required amount to start paying. This exception also applies to the new rulings. Those who are only using platforms for occasional transactions may not have their data sent to the HMRC. Occasional sellers are those classified by HMRC who make less than £2,000 for the reportable period, or less than 30 sales.

In addition, companies that provide more than 2,000 property rentals per year may be exempted since the entities are more likely to be aware of their tax obligations. 

Will HMRC know that you are earning money online? Yes. The main purpose of the digital platform reporting rules is to ensure that people who earn online are actually paying their income taxes.

Unless you fit the criteria for exemptions we listed above, the platform you use will report your earnings to HMRC. Then, they will match the data with your taxpayer information to ensure that you’re paying the right amount of taxes.

Yes. The platforms you use are only required to send data to the HMRC. They won’t be filing any tax forms for you. You will still be required to follow the same rules for tax returns. If you haven’t yet, make sure to register with the HMRC as a self-employed person and submit your Self Assessment tax returns. 

In general, the new rulings won’t have any effects on any tax relief or trading allowance you’re initially entitled to. Let’s say, for example, that you earn less than the £1,000 trading allowance in a single tax year.

In this case, you won’t need to register as self-employed or submit a tax return. In addition, the ruling does not affect any allowable expenses that you’re entitled to.

Thankfully, the new rulings also require the platform to send a copy of the data they sent to HMRC to you. You can review the document and see for yourself if they match your records. 

The one thing you have to consider is the differences between the reporting period and the taxation period. The platforms will send reports based on a calendar year, from the 1st of January to the 31st of December.

On the other hand, self-assessment tax returns cover a tax year, which is from the 6th of April to the 5th of April of the following year. Due to the different periods, what the platform reported will most likely be different from the amount you have on your tax return.

If you’re already paying your taxes correctly, then these new rulings should not have any effect on your side hustle. However, those who may not be registered yet should do so as soon as possible.

The digital platforms will start gathering data in January 2024 and submit the first reports in January 2025. 

Final Thoughts

The new digital platform reporting rules won’t affect sellers as much since the platforms are the ones doing additional work to submit reports. Still, you should remain mindful of your earnings and expenses and report your income accurately.

Those who aren’t registered for self-assessment must do so as well to avoid potential legal trouble.

For more details and advice about the new rulings, we would recommend speaking to a Chartered Accountant.

https://www.gov.uk/government/publications/reporting-rules-for-digital-platforms/reporting-rules-for-digital-platforms

https://www.taxi-point.co.uk/post/tax-law-all-taxi-and-phv-driver-revenue-made-via-digital-booking-platforms-will-be-reported-to-hmrc

https://www.litrg.org.uk/latest-news/news/211202-are-you-using-trading-allowance-correctly