Side Hustle Sales and Tax Consequences in the UK
With the rise of online platforms like Amazon and eBay, more people are turning to side hustles to boost their income. However, it's important to understand the tax implications of these activities in the UK.
Trading Allowance
The UK offers a £1,000 trading allowance. This means you can earn up to £1,000 from trading activities, such as selling goods online, without having to pay tax on that income. If your total income from all trading activities exceeds £1,000, you'll need to report it to HMRC and may have to pay tax on the excess amount.
Reporting Income
If your side hustle income exceeds the £1,000 allowance, you must report it on a Self-Assessment tax return. This involves registering for Self-Assessment by 5 October following the end of the tax year in which you started trading. You'll need to keep accurate records of your sales, income, and expenses.
Tax Consequences
When reporting your income, you have two options:
Deduct the trading allowance: Subtract £1,000 from your total income and pay tax on the remaining amount.
Deduct actual expenses: Subtract your actual expenses from your total income and pay tax on the difference.
Choosing the best option depends on your specific circumstances, but generally, deducting actual expenses can be more beneficial if your expenses are higher than the trading allowance.
Important Considerations
Capital Gains Tax: If you sell personal possessions for a profit, you may need to pay Capital Gains Tax if the item is worth more than £6,000.
Penalties: Failing to report your income or pay the correct amount of tax can result in penalties.
Information sharing: If you sell on digital platforms, the platform operator will collect and check specific details about you and they may report details to HMRC.
