What Is The Side Hustle Tax – We have it Simplified

The UK’s now so-called “side hustle” tax is confusing everyone. If you’re selling on platforms like Cress, eBay or Vinted you’ll want to know what’s actually doing on. So, what is the side hustle tax – we have it simplified.

Starting January 1, 2024, platforms facilitating additional income sources are required to gather and disclose transaction specifics to HM Revenue and Customs (HMRC). This development has stirred unease within the resale and preloved community, as individuals selling their gently used clothing fear potential clashes with tax authorities.

The key question is whether you’re parting with your kids’ outgrown or unwanted clothes for less than what you paid or if you’re buying with the aim of turning a profit. According to HMRC, consistent selling of goods or services on an online marketplace could classify you as a ‘trader,’ obliging you to pay taxes on earnings exceeding £1,000.

What Is The Side Hustle Tax - We have it Simplified
Martin Lewis from Money Saving Expert Breifly Explained the ‘new’ tax on X (formerly Twitter)

The determination, however, hinges on what, why, and how you’re selling, especially whether you’re making a profit. If you’re decluttering and selling old clothes at a price lower than their purchase cost, you won’t be labeled a ‘trader.’ There’s no tax liability for selling unwanted clothes that aren’t turning a profit.

In the case of reselling for a profit, there’s a £1,000 threshold before tax liability kicks in. Crossing the 30 sales pre year limit might prompt a ‘nudge’ letter from HMRC, seeking clarification on your transactions. If these sales involve only your preloved clothes, there’s generally nothing to worry about.

In the UK, individuals have a £1,000 tax-free allowance for money make through propery or a ‘trading income’ (Getty Images/iStockphoto)
In the UK, individuals have a £1,000 tax-free allowance for money make through propery or a ‘trading income’ (Getty Images/iStockphoto)

So, in summary (what is the side hustle tax – we have it simplified), the recent regulatory changes are expected to have minimal impact on the everyday online seller that’s simply decluttering or getting rid of their outgrown or unworn clothes. The status quo for your selling practices can be maintained without significant alterations.

If you would like more information on the ‘side hustle’ tax some useful links are:

Money.co.uk / Full Fact / LITRG.org / The Independent / Money Saving Expert

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