HMRC has launched a new compliance initiative aimed at individuals who may have undeclared income from online marketplace sales in the 2022/23 tax year and earlier.
At the same time, a separate campaign has been introduced to raise awareness about the tax implications of ‘side hustles’ and extra earnings.
These efforts highlight HMRC’s growing focus on the digital economy and the increasing number of people earning income outside traditional employment.
Whether selling handmade products, offering services through online platforms, or monetising content as an influencer, taxpayers need to be aware of their obligations and ensure they remain compliant with UK tax laws.
Online marketplace sales: HMRC’s compliance crackdown
As part of its latest compliance campaign, HMRC has sent letters to a number of individuals identified as having received income from selling goods through online marketplaces but who may not have declared it. The letter explains that those who buy or create items to sell at a profit are likely to be considered as trading, meaning they may be subject to income tax on their profits.
However, not all sales will result in a tax liability. No tax is due if total sales are below the £1,000 trading allowance, which allows individuals to earn up to this amount from self-employment or casual trading without needing to report it. Similarly, if a person’s total taxable income is within their personal allowance (£12,570 for most taxpayers in 2023/24), no tax will be payable.
In addition to income tax, HMRC’s letter highlights potential capital gains tax (CGT) liabilities. CGT may apply when personal possessions (known as chattels) are sold, depending on their nature and value.
If an item sells for £6,000 or less, no CGT is due. Where a gain is made on a more valuable item, individuals may still benefit from their annual CGT exemption, which has been significantly reduced in recent years:
- £12,300 for 2020/21 to 2022/23
- £6,000 for 2023/24
- £3,000 for 2024/25
Those who are simply selling unwanted personal belongings – such as clearing out old clothes, second-hand furniture, or used electronics – do not generally need to worry about tax. However, where there is a pattern of regular buying and selling for profit, HMRC may view this as a taxable trade.
How to respond to HMRC’s letter
The letter from HMRC requires recipients to take action within 30 days. If an individual has income to declare, they should follow the instructions on the gov.uk website or call HMRC using the number provided. Those who do not owe any tax should still respond, either by phone or email, to confirm their position.
Failure to act within the deadline may result in a compliance check, which could lead to additional scrutiny and potential penalties. HMRC has access to extensive data from online platforms, banks, and other sources, meaning it can often cross-check undeclared income.
‘Side hustles’ campaign: raising awareness of tax obligations
Alongside its compliance letters, HMRC has launched a public awareness campaign titled ‘tax help for hustles’. This initiative is aimed at individuals earning additional income outside of traditional employment, whether through digital platforms, freelance work, or rental properties.
The campaign provides guidance across several common income streams:
- Buying or making things to sell – those who create handmade products, refurbish goods for resale, or engage in dropshipping may be considered traders.
- Side gigs – individuals offering services such as tutoring, delivery driving, or pet-sitting must consider whether their income is taxable.
- Multiple job holders – those juggling various part-time or freelance roles may need to account for additional tax liabilities.
- Content creators and influencers – social media earnings, including advertising revenue, sponsorship deals, and affiliate marketing, could be taxable.
- Renting out property – those letting out rooms, holiday homes, or other properties need to be aware of income tax and CGT implications.
More details can be found at: https://taxhelpforhustles.campaign.gov.uk/?&utm_source=icaew_article&utm_medium=referral&utm_campaign=sidehustles
What this means for taxpayers
These initiatives underline HMRC’s focus on ensuring that income earned through digital platforms and side ventures is properly declared. With increased access to transaction data from online marketplaces and financial institutions, the tax authority is taking a proactive approach to identifying undeclared earnings.
For those engaging in occasional sales or small-scale side hustles, the trading allowance and tax-free exemptions may mean no tax is due. However, anyone earning more than these thresholds should ensure they are meeting their tax obligations.
If you have received a letter from HMRC or are unsure about your tax position, seeking professional advice can help clarify your obligations and avoid penalties.
Author: Angelo Chirulli, Tax Advisor Diacron London