Experts are warning of the coming tax crackdown on millions of workers who earn extra money from a side hustle.
Since the pandemic, the number of people who have taken on a second job to supplement their income has risen substantially.
The gig economy has contributed to this increase with households choosing to rent out their spare room on Airbnb or drive for Uber.
Daily Express has previously reported on how people have been earning more cash thanks to their various online side hustles.
However, many are unaware of legislation that will see HM Revenue and Customs (HMRC) demand side hustle platforms, like Uber, to record how much money people earn.
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This is part of a wider tax crackdown on those earning money from freelancing and side hustles.
Workers will still be expected to submit and pay tax on their self-employed income every year to the tax body.
HMRC’s ‘Model Reporting Rules for Digital Platforms’ is designed to spot discrepancies between financial reporting made by the individual and digital platforms.
These new rules come into effect from January 1 at which point Uber, Etsy, Airbnb and other platforms will have to record users’ income and report it to HMRC.
Seb Maley, the CEO of tax insurance provider Qdos, broke down how this legislation will impact workers on a practical level.
He explained: “This legislation has flown under the radar, but will have big implications for anyone renting their place out on Airbnb, freelancing on Upwork or Fiverr, or driving for Uber – whether that’s as a side hustle or full-time job.
“The crux of it is that HMRC doesn’t trust the growing number of people with side hustles in the UK to accurately report how much money they’re making this way.
“The tax office will go directly to these platforms, who will become responsible for recording this information and handing it over to HMRC.”
As such, the tax expert urged freelancers to get on top of their tax compliance obligations as soon as possible.
Mr Maley added: “HMRC will then compare it with the tax returns submitted by these people. If the numbers don’t add up, HMRC has everything it needs to launch a tax investigation. Needless to say, it’s vital that people earning money this way make sure of their tax compliance.
“The Minimum Trading Allowance is £1,000 a year. So anyone earning more than this via self-employment, and above the personal allowance, needs to pay tax on that income.
“The latest figures suggest there are 7.25 million gig workers in the UK, with one in six adults working a gig job once a week – with this in mind, the incoming measures are set to impact millions.”
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