The UK has signed up to new OECD rules in a bid to reduce tax evasion. So, from 1 January 2024, online marketplace platforms must collect seller data and report their income by January 2025. However, this is not a new ‘side hustle tax’ or a change to current UK taxation laws.

Paying tax when selling on eBay and Vinted

In early January 2024, many outlets and social media users commented on a so-called new side hustle tax UK law aimed at those selling goods on platforms including eBay. And this has led to many online sellers asking if there is a new HMRC side hustle crackdown and those with a side business wondering – how much tax do you pay on a second job?

Online marketplaces selling second-hand clothes, such as Vinted, are particularly popular among those looking to offload unwanted items and others looking for bargains.

These recommerce websites are worth almost £7bn to the UK economy, according to Barclays. So, with the HMRC self assessment payment deadline fast approaching, how much can you earn before declaring additional income in the UK?

Here’s our guide on whether anything has changed regarding a second income tax. And how much tax do you pay on a second job?

Is there a new side hustle tax?

There are no new side hustle tax UK laws. Any confusion stemmed from an HMRC announcement that from 1 January 2024, online marketplace platforms must collect seller data and report their income by January 2025.

That’s because the UK has signed up to new rules via the Organisation for Economic Cooperation and Development (OECD) in a bid to reduce tax evasion.

In terms of this month’s self assessment payment deadline, that is for income earned during the tax year 6 April 2022 to 5 April 2023.

Some have interpreted the OECD signup as a new tax on side hustles in the UK, but this is not the case.

As confirmed by Full Fact: “HMRC has not introduced a new tax… What has changed is that digital platforms now have to automatically share some income data with HMRC.”

If you earn a certain amount by selling anything, you pay income tax – that’s standard. But what is the threshold?

How much can you earn before paying tax?

In the UK, you have a tax-free personal allowance of £12,570 at the time of writing. When selling anything online, it also depends on whether your selling activities count as trading – there is a trading allowance relief of £1,000 at the moment.

Of course, if your sole source of income involves selling items online, then it’s not really a side business. It’s your full-time or part-time job, so if you’re a sole trader, you register with HMRC and file a self assessment tax return.

If you buy goods to sell them on, or make them yourself, for a profit, you are “likely to be trading” according to HMRC.

Also bear in mind that you may need to pay capital gains tax on personal possessions if you make a profit of £6,000 or more from selling something. Elsewhere on our blog we have a guide for small businesses about capital gains tax.

Where it becomes slightly more complicated is when you sell goods via online marketplaces as a side hustle on top of working as an employee for a UK company.

How to declare extra income

If you earn over £1,000 from a second income source, here’s how to declare it via self assessment in the UK:

  • Keep detailed records of your extra income, including receipts, invoices, and bank statements
  • If you’re a new self assessment taxpayer, register online through the HMRC website
  • Use the HMRC online tool or download the paper self assessment tax return form to accurately report your income, expenses and tax liability
  • Settle your tax bill by the due date to avoid penalties

For more information, here is our guide on how long to keep accounting records for in the UK – plus an explainer on expenses for travel, subsistence and any other deductibles.

Remember, failing to declare extra income can lead to fines and penalties, so it’s essential to comply with tax regulations.

How much tax do you pay on a second job? Working it out

Looking ahead, let’s say you earn £2,500 from selling your old clothes, on top of £35,000 in your regular job in London, for the next tax year from 6 April 2023 to 5 April 2024:

  • Combined, your total taxable income for the year is £37,500. When paying tax to HMRC, the £12,570 personal allowance and £1,000 trading allowance relief are deducted.
  • The basic tax rate on your income between £12,570 and £50,270 is 20% (but 19% in Scotland). Your employer will pay the income tax due on your monthly salary to HMRC, on your behalf – i.e. 20% of £22,430, which is £35,000 minus £12,570.

Then you need to declare your extra £2,500 income and pay the basic tax rate due on the extra £1,500 after the £1,000 trading relief is deducted. In this scenario, that would be 20% of £1,500.

Final thoughts: How much tax do you pay on a second job?

We hope this guide has cleared up any confusion over side hustle taxes. As of 2024, there is no new side hustle tax in the UK.

However, online marketplaces have new reporting requirements to help ensure no-one tries to evade declaring the extra income they are already due to pay.

Many landlords also use a self assessment tax return. Previously we’ve written about tax on rental income – what is it and how much do you pay?

And if you need longer to pay a debt to HMRC, here is our guide on how Time To Pay (TTP) arrangements work.

If you need any help with your tax situation, we’re here to help. If you would like a free, no-obligation chat or need any more information then please don’t hesitate to get in touch.