HMRC rolls out tax for side hustlers

[Saracen999]

30 transactions? That's mad. I sold 10 items just from breaking down my PC!

But it's just a level at which HMRC start to take an interest .... possibly. It might cause tgem to look at you a bit harder. Sure, you can sell 10 items from breaking a single PC and it isn't trading. But if you're doing that 3 times a week, monthin and month out .... well, it's a pretty strong indicator you are. The same applies to some arbitrary value limit - hitting it doesn't make you a trader or mean it's taxable but it might prompt a closer look. Even then, I suspect the resources actively spent pursuing this end of things will be pretty minimal. I'd guess it's more of a PR campaign that a major push.

Personally, and it's just anecdotal evidence, my experience of HMRC has been that they've been very fair and even-handed, Even helpful, in my early days, pointing out expenses I should have been off-setting but hadn't, beause I didn't know I could. Granted, that was quite a few years back but, as the recipienc of three or four inspections/'audits' over about 30 years, I never found them to be unduly harsh. That said, I wasn't pulling anything dodgy, and was scrupulous about declaring stuff, and maybe it showed in my manner. I gaher they can be a right PITA if tgeyget the impression you are up to something naughty.

I guesss the moral of that is that if you have a clean conscience, even a tax audit is nothing to worry about, just a nuisance to go through. But, my bet is that a LOT of small 'side-hustle' businesses make a few grand a year for the operator, and if there's millions of people doing it .... it adds up to a serious loss for the exchequer. So we can't be too surprised if they've decided to clamp down a bit, and/or if they've come up with a way of getting bigger businesses, like eBay, to do a lot of their basic leg work for them, by making this stuff reportable.

[badass]

Ebay says they will auto-report to HMRC after you make £1735 or more than 30 transactions a year,even if under the limit. Your sales will be reported to HMRC whether you like it not. Also anyone who claims any sort of state benefit(even a state pension or tax credit) can now have their bank account checked by the goverment automatically:
https://www.benefitsandwork.co.uk/ne...s-surveillance

So what happens if you are having a clearout of old stuff from the attic? Audio,photographic and computing stuff can easily go over that. The £1000 limit is utterly out of touch considering how much modern electronics costs. Even some luxury phones can cost nearly £2000! What about high end clothes or jewellery?

Old watches? Again,how many people have receipts for all the old items they want to sell? Even for the receipts I have for some old items,they can fade over time.

If HMRC asks for evidence in terms of receipts to make sure you are not a "business" how are you going to prove this?

Also,if you have receipts and they look at the sticker price from 20 years ago,are they going to apply an inflation correction to the price? So if an amp cost £2000 in 2000,with inflation its £3600 in 2024. So if you sell it for £2050,then it's still not really a profit. But OFC they will ignore inflation.

All they will do is stand their ground and start sending threatening letters,if you don't pay by X date you get Y fine,etc. The fines will get worse and worse. How many people will cave in because they are scared of legal fees and massive fines if they lose,especially as the government has a ton of its own lawyers.

This is exactly what they are trying to do,and will try it on until someone takes them to court and wins.



With the Digital Currencies they want to eventually end the use of cash.

Here's the most likely scenario:
You sell your kit for £2050 Ebay nofify HMRC

Nothing happens at all. Nothing. HMRC simply do not have the resources to chase up every seller they are notified about.

However if they did decide to pursue, simply telling them it was a one off clearout will get them off your back ,provided you're not aggressive about it.

[badass]

But it's just a level at which HMRC start to take an interest .... possibly. It might cause tgem to look at you a bit harder. Sure, you can sell 10 items from breaking a single PC and it isn't trading. But if you're doing that 3 times a week, monthin and month out .... well, it's a pretty strong indicator you are. The same applies to some arbitrary value limit - hitting it doesn't make you a trader or mean it's taxable but it might prompt a closer look. Even then, I suspect the resources actively spent pursuing this end of things will be pretty minimal. I'd guess it's more of a PR campaign that a major push.

Personally, and it's just anecdotal evidence, my experience of HMRC has been that they've been very fair and even-handed, Even helpful, in my early days, pointing out expenses I should have been off-setting but hadn't, beause I didn't know I could. Granted, that was quite a few years back but, as the recipienc of three or four inspections/'audits' over about 30 years, I never found them to be unduly harsh. That said, I wasn't pulling anything dodgy, and was scrupulous about declaring stuff, and maybe it showed in my manner. I gaher they can be a right PITA if tgeyget the impression you are up to something naughty.

I guesss the moral of that is that if you have a clean conscience, even a tax audit is nothing to worry about, just a nuisance to go through. But, my bet is that a LOT of small 'side-hustle' businesses make a few grand a year for the operator, and if there's millions of people doing it .... it adds up to a serious loss for the exchequer. So we can't be too surprised if they've decided to clamp down a bit, and/or if they've come up with a way of getting bigger businesses, like eBay, to do a lot of their basic leg work for them, by making this stuff reportable.

My last experience with HMRC was when they uncovered an inconsistency with my tax return 2 years later that revealed I had underpaid my tax by just over £1000
After a brief discussion they agreed that I would be sent the bill and interest would only begin accruing if I missed the payment deadline (IIRC around a month after getting the bill)

They did this because it was plainly obvious the mistake was genuine. They could have legitimately fined me £200 for that and charged interest from the point I underpaid.

[CAT-THE-FIFTH]

Here's the most likely scenario:
You sell your kit for £2050 Ebay nofify HMRC

Nothing happens at all. Nothing. HMRC simply do not have the resources to chase up every seller they are notified about.

However if they did decide to pursue, simply telling them it was a one off clearout will get them off your back ,provided you're not aggressive about it.

You have not read anything I said,so next time read what I said. People need proper clarification which the HMRC and government are not providing. Your argument "it will be fine bro",and then your nice insult is funny when you say this:

Whilst I am not a tax adviser so take with a pinch of salt
.....
It's certainly not unheard of for HMRC to attempt to punish well beyond their legal right to do so.

Also,learn how to talk to people. Remember you are talking to random people on a forum. Just because the people around put up with your rudeness,don't think strangers will.

No tax will be due if you have a clearout of old stuff from the attic. Even if you sell personal items for more than you purchased them for, no tax is due.
You have to buy items with the intent of reselling for a profit to have tax due, and even then there's a £1000 trading allowance.
I'd imagine HMRC would have to provide evidence that you're buying items to sell. A clearout might only happen once every few years over a short time frame. A trader will be regularly selling items.
HMRC would have to prove with evidence that you're buying items to sell for a profit. I'd assume HMRC would look for people buying and selling regularly (eg every day), and with numbers involved that would take the profit well over the trading allowance.
The point about threatening letters and fines, it's possible, but it's not something that goes straight to court. First you can talk to them, then there's appeal, lower tribunal, ADR, upper tribunal, before the courts system.

I frequently see eBay sellers with multiple pages of items listed, many items sold on each, but registered as a personal seller. What if they're not paying tax on their profits? What if they're on benefits and shouldn't be?

Not a single person is asking,IF HMRC ask you for evidence,what is the evidence they are asking for? People are just parroting the HMRC line and/or hurling insults about this?

One of the ways to prove you are not selling for profit,is proof of purchase. But what if you don't have it because the item is old(lost) or the receipts are faded. Just having a decent old hifi system can easily push you over £1000 or even £2000. Classic turntables for example hold their value. Camera equipment,etc.

Also is inflation taken into consideration? £2000 24 years ago is £3600 now.OFC not.

So anything under £3600 is technically not a profit and you are making a loss on the purchase price.

[Saracen999]

....

Not a single person is asking,IF HMRC ask you for evidence,what is the evidence they are asking for? People are just parroting the HMRC line and/or hurling insults about this?

One of the ways to prove you are not selling for profit,is proof of purchase. But what if you don't have it because the item is old(lost) or the receipts are faded. Just having a decent old hifi system can easily push you over £1000 or even £2000. Classic turntables for example hold their value. Camera equipment,etc.

Also is inflation taken into consideration? £2000 24 years ago is £3600 now.OFC not.

So anything under £3600 is technically not a profit and you are making a loss on the purchase price.

My point in relation to that was that my personal experience, limited though it obviously is, was that HMRC have never been out to unfairly clobber me. But it has to be said, in context, that they are more than aware that many people, especially in cash-handling jobs, have been, are and probably will continue to take a few liberties with what they report on, and what they don't.

A couple of things, IMHO, follow from that. One is that HMRC inspectors, generally, get to see both people that are, and aren't, taking those liberties and, akin to police officers, develop a sense of when people are being open and honest, and when they're being evasive or downright deceitful.

Beyond that, many years ago, I trained as a Chartered Accountant (though I've been outside of that for a long time, having hated it) but it did involve direct training in, and discussions with, HMRC inspectors. Part of that discussion was about their training, and they are (or, given the time lapse and I doubt it's changed, certainly were) specifically trained in extracting information even during apparently casual chatting before or during even informal-seeming visits. Personally, my opinion is that no such visit is ever informal. But it never bothered me when receiving such visits because, by choice I had NOTHING to hide. I wasn't skimming, not from some sense of morality but from the simple perspective that, to me, it plain wasn't a good risk/reward calculation. The sums I could have gained, given my modes of operation, were trivial, and so I always avoided ALL cash sales transactions.

It is a perspective, by the way, that I carry on these days, declining "cash" transactions when offered them by tradespeople, or at the very least and even when paying in cash, ALWAYS insisting on a receipt. It is not always well-received, but that's entirely the point of requiring it.

I can say from personal experience that SOME traders, having been well and truly nailed, will seek to mitigate their penalties by actively cooperating with HMRC and turning in those paying "cash", by which I mean, dodging the VAT, etc. Again, for peace of mind, I will always pay the tax rather than risk it biting me in the tush later, not least because though it may be rare, it does happen.

All that said, if HMRC were to ask me for receipts for hifi bought in the 70s 0r 80s, I probably could, with a bit of digging, produce them. I typically don't keep receipts for 'consumable' items, but I do for major items, initially for warranty purposes, but then, because it's easier to leave such stuff in files than root it out to dump it.

But, I probably couldn't find every document. There will be a limit to how long I keep stuff and for how much effort would be required in finding it. Certainly in relation to traders, there is also a limit to how long HMRC require you to keep records, generally, 7 years IIRC. Nobody in their right mind expects MOST people to have receipts for things bought decades earlier .... except for packrats like me.

Which brings me back to that "evidence required" point. Before I decided what evidence I might need to provide for historic transactions, I'd want to see what HMRC actually asked for, and for truly old stuff, I might well ask (in writing) for clarification on what they can reasonably expect me to still have. My experience, as I said, is that they're generally reasonable.

Beyond that, in those discussions with inspectors during my training (which was a long time ago, so could have changed) what they're usually looking for isn't an "Ahah" moment over a single transaction. It's a pattern of transactions, often over a medium or long period. And, generally, by the time they come specifically asking questions (and I don't mean getting selected for a random audit every few years, about once a decade in my case, a couple of which were merely about a 1-hr pro-forma visit) they will usually have a pretty good idea of what they suspect people are up to, very likely have a fair bit of evidence of a track record, and merely be looking to "seal the deal", as it were, in nailing someone who HAS been taking liberties, and often serious ones.

There is a concept in accounting, or more precisely in auditing, known as "materiality". Any audit statement, for instance, doesn't claim accounts are "correct", or "accurate", because the only way to do that is a 100$ examination of every transaction, front to rear, and it'd be a full time, permanent role to do it. Instead, the audit statement generally refers to "true and fair" picture of the company's position, and that embodies the notion of materiality. I once (in traing) had a tax barrister put it (paraphrasing a bit) ...

Would a user of the accounts, like a bank considering a loan, an investor considering investing or maybe a potential major customer considering a big contract, care about a discrepancy if they knew of it's existence?

By way of hammering home the point, he carried on

If General Motors completely forgot to include the accounts for Vauxhall in their corporate accounts, it is likely that it would make such a small difference to users of those accounts that it wouldn't change their decision in any way?

That is the principle of materiality. While that example might (or well might not) have been a bit of an exaggeration, it makes the point and it's one those HMRC (though it was HM Inland Revenue and HM Customs & Excise in those days) apply too .... if they find someone that sold a couple of even quite expensuve old bits of hifi (or camera gear, or an old watch or gold jewelry) will they much care? Probably not, unless it was a VERY expensive item indeed. They're generally not interested in people flogging their own, personal kit because, for a start, it MIGHT be subject to Capital Gains but not to income tax, AND sheer materiality.

What they are, IMHO, after isn't you or me flogging an old Quad amp etc. Or my Mitchell turntable, which Mitchell themselves pointed out recently could well fetch several grand on it's own, on the 'Bay, as a one-owner original deck. What they're after is people running a business in old stuff, regularly buying and selling and pretending it's just an clear-out of old stuff. Due to materiality, they just don't have the resources, or truthfully, much inclination to go after a few quid, or a few hundred quid, from my turntable even if it has become technically liable. They have far, FAR more profitable ways to spend inspectors expensive time, and the vast bulk of of it will be people actually trading, i.e. a "side hustle", not someone flogging their unwanted gear. That "side hustle", when multipled up across potenially millions of people, does run into tax on billions. But chasing me for selling an old amp or turntable isn't a good use of time.

However, putting out a suitably and vaguely worded statement about side-hustles, however they describe it, does serve three potential uses, in addition to having a near-zero cost :-

1) It might genuinely inform people that don't realise their "side hustle" is taxable into declaring it. In whih case, job done, income that should be generating tax revenue but for mass ignorance of the liability for minimal cost or effort, and

2) It somewhat reduces the old "I didn't know" excuse. That'll need more of a campaign that an odd statement on social media though.

3) It might just scare some of those that do know they should be paying tax but aren't, into coming forward/ Again, job done for minimal cost.

What I don't see as in any way viable is a large-scale campaign of targetting people selling a few bits of old gear, unless you're Del-boy with a rare million-pound antique watch, of course. They might do a bit of a drive, AND heavily publicise it, but it'll amount to little more than a PR campaign. They don't have anything like the resources to go after millions of people selling their old clobber, and far more productive things for the staff they do have to be doing with their time. A very small team, for a while, doing some well-publicised PR stuff, maybe. Long-term, large-scale active hunt? Not a prayer. IMHO, of course.

[CAT-THE-FIFTH]

All that said, if HMRC were to ask me for receipts for hifi bought in the 70s 0r 80s, I probably could, with a bit of digging, produce them. I typically don't keep receipts for 'consumable' items, but I do for major items, initially for warranty purposes, but then, because it's easier to leave such stuff in files than root it out to dump it.

But, I probably couldn't find every document. There will be a limit to how long I keep stuff and for how much effort would be required in finding it. Certainly in relation to traders, there is also a limit to how long HMRC require you to keep records, generally, 7 years IIRC. Nobody in their right mind expects MOST people to have receipts for things bought decades earlier .... except for packrats like me.

Which brings me back to that "evidence required" point. Before I decided what evidence I might need to provide for historic transactions, I'd want to see what HMRC actually asked for, and for truly old stuff, I might well ask (in writing) for clarification on what they can reasonably expect me to still have. My experience, as I said, is that they're generally reasonable.

......

What they are, IMHO, after isn't you or me flogging an old Quad amp etc. Or my Mitchell turntable, which Mitchell themselves pointed out recently could well fetch several grand on it's own, on the 'Bay, as a one-owner original deck. What they're after is people running a business in old stuff, regularly buying and selling and pretending it's just an clear-out of old stuff. Due to materiality, they just don't have the resources, or truthfully, much inclination to go after a few quid, or a few hundred quid, from my turntable even if it has become technically liable. They have far, FAR more profitable ways to spend inspectors expensive time, and the vast bulk of of it will be people actually trading, i.e. a "side hustle", not someone flogging their unwanted gear. That "side hustle", when multipled up across potenially millions of people, does run into tax on billions. But chasing me for selling an old amp or turntable isn't a good use of time.

If that is the case why is the limit set at £1000,and why not higher? Why is the limit now set at 30+ transactions a year even if you are under the limit? Surely if there was not enough people at HMRC,why bother.

Except,they can bother as they are spending loads on automating it all.

People do realise HMRC is now upgrading their automation capability a lot,right? They are using "machine learning" to automate data analysis:
https://www.krestonreeves.com/news/t...mrc-ai-system/

HMRC has revealed that there are now 55 billion items of data relating to taxpayers in its ‘Connect’ AI system, which it uses to target taxpayers for tax investigations.

HMRC’s ‘Connect’ is an AI system that uses data from a wide range of sources to identify potential cases of tax evasion and avoidance. It is used by HMRC to select individuals and businesses for further tax investigations. The database has now grown to 6100 gigabytes of taxpayer data.

Connect allows HMRC to quickly analyse information that would previously have required a huge amount of time and human resources.

So,basically they will just automate it as much as possible to cut back on physical interaction requirements. That is where you are heading to.

This is in line with all the other stuff they have automated usually to comical effect.

This is context of a government which cut the capitol gains threshold from £12300 to £3000 in two years. Have also frozen or reduced many other thresholds too. So the HMRC is under lots of pressure to get more receipts in.

Looking at the context of how the government and its agencies are spaffing up everything what half thought out plans,regarding trade,etc do you really think we can just go about "trust me bro" nothing will happen?

Look at all official releases about this move - nothing is clarified properly. It's all "we have systems to determine XYZ".

What if you are selling a whole hifi or camera system? It would easily go well over the £1000,let alone £2000 in a year. Plenty of people are hobbyists who upgrade frequently sell off old stuff,etc.

Also remember 30 items a year for Ebay is nothing for many people. Someone could easily sell off old toys,books and childrens clothes,etc.

I am just very cynical about it.

[Saracen999]

If that is the case why is the limit set at £1000,and why not higher? Why is the limit now set at 30+ transactions a year even if you are under the limit? Surely if there was not enough people at HMRC,why bother.

Except,they can bother as they are spending loads on automating it all.

People do realise HMRC is now upgrading their automation capability a lot,right? They are using "machine learning" to automate data analysis:
https://www.krestonreeves.com/news/t...mrc-ai-system/



So,basically they will just automate it as much as possible to cut back on physical interaction requirements. That is where you are heading to.

This is in line with all the other stuff they have automated usually to comical effect.

This is context of a government which cut the capitol gains threshold from £12300 to £3000 in two years. Have also frozen or reduced many other thresholds too. So the HMRC is under lots of pressure to get more receipts in.

Looking at the context of how the government and its agencies are spaffing up everything what half thought out plans,regarding trade,etc do you really think we can just go about "trust me bro" nothing will happen?

Look at all official releases about this move - nothing is clarified properly. It's all "we have systems to determine XYZ".

What if you are selling a whole hifi or camera system? It would easily go well over the £1000,let alone £2000 in a year. Plenty of people are hobbyists who upgrade frequently sell off old stuff,etc.

Also remember 30 items a year for Ebay is nothing for many people. Someone could easily sell off old toys,books and childrens clothes,etc.

I am just very cynical about it.

I get the cyniccism bit.

Let me say this. The tax rules have not changed. That is to say, there is no new tax liability where there wasn't one before.

What has changed is the data being passed to HMRC by selling platforms about transactions on their sites, under certain circumstances.

Another thing to bear in mind is that rarely are tax rules as simple as yes or no.

So, if you are selling personal items, i.e. having a loft clear-out, the official line from HMRC (and yes, I checked) is you probably aren't liable for paying any tax on it. But that means there are circumstances where you are.

To know for sure if tax is due, you have three basic choices (IMHO) :-

1) Spend a lot of time yourself understanding tax rules, or
2) Pay a professional to tell you, or
3) Report the "income" to HMRC, making it clear what you're doing, and see what they say.

Generally, there are things you can do to make a few quid that, if they exceed a given threshold, are taxable. One used to be renting out a room in your home. Still is, as far as I know. Up to a point, you can do so without tax, but above that, tax is due, and there are conditions to be met, like the "in your home" bit. A similar rule applies. IIRC, to "side-hustles", i.e. a very low value making of a bit of cash. Up to a point, and I think it was £1000 but it's ages since I've looked.

The problem, if you like, is that very large numbers of people are only really used to tax being deducted at source (PAYE), by their employer, and don't realise that their cake-making business, or making some money creating simple websites, or buying furniture, doing it up and selling for a profit MIGHT resuLt in taxable income.

Selling your own bits and pieces also MIGHT, though it'll be Capital Gains Tax and that usually only applies if you sell it for more than you original paid, and if the total capital gain on all items sold in a year exceed the CGT tax-free allowance (which memory tells me used to be something like £6000/year.

So a simplistic example might be buying a watch for £10 in a car boot sale 30 years ago, then getting offered £30,000 buy an antique dealer. The capital gain would be £29,990, and if the tax free allowance is £6000, and assuming you sold nothing else for a gain, then you gain £29,990-6000, or £23,990, which would be chargeable at whatever the CGT rate is.

To be clear, I'm making these figures up as an illustration, not claiming their correct and current, and the example is simplistic.

So if you sold a hifi system of high-value components, and you sold your camera gear, and some jewelry you inherited, and .... you get the picture .... what you'll possibly end up doing is making a list of the cost/value on acquisition, and the sale value, and the gain per item, because any one item might not result in tax, but a long list of them might. The solution there might, for example, be sell half this year and half next year. But it'll perhaps be more complicated if you "inherited" that jewelry or watch. At what value does it hold when YOU got it? Market value at the date you inherited it? Cost when you ancestor bought it 300 years ago?

Even where the general principle is there's no tax selling the stuff in your attic, situations can arise when there is, which is why HMRC says "probably" no tax.

To reiterate, as I understand it, tax rules and when tax is or isn't due hasn't changed. Anyone whose "side-hustle" is resulting in taxable income this year is in the same boat they were last year, if making the same income ... it MIGHT result in a tax liability, or it might not. There is no clear, simple definitive yes/no because it all depends on the detail.

Generally, as I said, HMRC aren't looking to be vindictive, and generally, will look much more kindly on people genuinely unaware, or who go to HMRC before HMRC come banging on your door. They, as I understand it, don't have much choice about some elements of rectifying even unknowing unpaid tax, because late payment interest is, IIRC, laid down in statute. But they do have discretion in applying many fines and penalties and they can be heavy if they conclude people have been deliberately dodging a genuine liability.

It's usually much less expensive to go to them, be honest and say I've been doing this, here's the details, I just found out I MIGHT owe some tax, can you help me please. They usually will.

The problem with the vagueness of all the "mights" is that every situation can be different, and without specific detail, the situation can vary. Sell two items on the same day and the total might result in tax being due, but sell one on a given day and the other the following day and it might not (PROVIDED the new tax year started between those two days).

All that's happened, as I understand it, is more data going from selling platform to HMRC automatically, which makes it more likely that those that should have been paying tax, maybe for years, but haven't been, are likely to get spat out onto an inspectors desk by their computer system. Then, that person might get a visit because of these changes in data reporting, but the fact remains that if they were trading enough in a side-hustle that they should have reported it before the changes, then they should have reported it before the changes. The onus is on us to know, or find out, if we're conducting any form of business, on any scale, whether it's large enough to generate a liability. Even if we aren't in business, but just selling off our old stuff it MIGHT carry a tax liability, but for most of us, generally won't, not least because most such selling isn't at a gain. If you think it might be, FIND OUT what the rules are and maybe stagger the selling over two years, or more.

Timing, or correct documentation, can make a big difference. Dealing with my parents estate when we lost them resuted in a tax bill of over £80,000 being avoided because we saw problem coming and changed the ownership from joint, to 50% of the property owned by each, directly. It was 100% legal, and in fact, the then-Chancellor (Gordon Brown) changed the rules a couple of years later so the default became what we'd had to do manually, and that £80k wouldn't have been at risk in the first place.

Anyone trading, side-hustle or not, really ought to find out what the situation is before HMRC come a-calling, because it might save them a fair whack being up-front about it.

But there are no simple cut and dried rules, because circumstances can vary so much, like selling half your hifi in one tax year and the other tomorrow, in the next one (if the date is, what, April 5th to 6th).

I get the cynicism, but I still think HMRC are simply trying to collect the correct tax where it has long been due, but for whatever reason, often not been forthcoming. They certainly don't have the resources to come knocking on your door with a hand out because you made a few hundred quid over what you paid for your old hifi, unless you're VERY unlucky in getting picked in a small random sample. They don't have anywhere remotely near the staff to do that, and have far better things to spend their time on, if they did. But if they can convince people to come to them, as indeed current law has required for a very long time, they'll certainly process the resulting annual tax return and cash the cheque (or bank transfer).

[Percy1983]

The one thing which will get hit hard is scalpers, you don't just happen to have 5 spare 4090s do you, many scalpers are clear traders.

[Jonatron]

If I understand it correctly, which is a big if, if a scalper buys and sells 5 GPU's a year, buying for £1000, selling for £1200, making £200 on each, no tax would be due because the profit is £1000, but they'd need to file a tax return because the gross income is over £1000. Filling in a tax return is confusing, they could and should make it easier.

[g8ina]

Lets try and keep insults out of it please folks....

[Percy1983]

If I understand it correctly, which is a big if, if a scalper buys and sells 5 GPU's a year, buying for £1000, selling for £1200, making £200 on each, no tax would be due because the profit is £1000, but they'd need to file a tax return because the gross income is over £1000. Filling in a tax return is confusing, they could and should make it easier.

I don't think its too bad, if working input figures from P60 + ebay profit in other income + expenses. The process asks questions at the start which then limits the questions/boxes to fill in and you get 10 months to figure it out.

[cptwhite_uk]

As someone who filled out my first tax return in April (due to company dividend being paid), I found the process relatively complex. It's entirely possible, but the amount of detail you have to provide is relatively high, understandably to correctly calculate the correct tax amount. But basically can be boiled down to:

1) What is your gross income (total before tax) from all sources - wages, secondary income streams, investments, savings

Take this total as your starting point. Total gross income.

2) What are your non-taxable elements - pension contributions (totals for all personal pension contributions, NOT including workplace contributions, so for the workplace pension, this would be the percentage taken from your gross wage, not the bit your workplace adds to it), any business expensives, charity donations, or other things that fall into this category.

Total this up and deduct from your total gross income. This end figure is the amount which your tax will be calculated from, along with your tax bracket and other considerations.

Gettings all the relevant information for point 2) can be quite a lengthy process, but it is doable. I'm fairly orderly with my finances and the whole process took me about 2 hours, given it was my first time doing it.

[Jonj1611]

For people in central locations like cities etc I guess selling locally will be best for them if they want to avoid all this. Gumtree have already said they are exempt as they don't collect payments

[kalniel]

If I understand it correctly, which is a big if, if a scalper buys and sells 5 GPU's a year, buying for £1000, selling for £1200, making £200 on each, no tax would be due because the profit is £1000, but they'd need to file a tax return because the gross income is over £1000. Filling in a tax return is confusing, they could and should make it easier.

Income would be £1000 in that case - revenue is over £1000 but income is less expenses. Gross income is still less expenses, but before tax.

[Saracen999]

For people in central locations like cities etc I guess selling locally will be best for them if they want to avoid all this. Gumtree have already said they are exempt as they don't collect payments

Well, yes and no. It depends on what you're doing and on how paranoid you're going to be about it. Don't forget that after all's said and done, if you should be paying tax on some form of business activity, then overtly taking steps like that t avoid notice, not doing so is tax evasion and IF you do get caught at it, then things can get quite unpleasant, aside from any levying of tax and/or penalties. For example, there are those that have found that getting caught being deliberately .... ummm, 'naughtly' is a good way to earn yourself a detailed audit/inspection .... several years on the trot.

I also mentiond, somewhere in the depths of one of my earlier lengthy posts, that tere have been occasions when some dodgy trader that's got caught being naughty has reduced their penalties by turning in everybody that's ... 'cooperated' with them, in being dodgy.

That is, every time you do a "cash" deal with a trader, perhaps to avoid VAT, you MIGHT be putting yourself on HMRC's radar. Every time you do a cash sale, it MIGHT be an HMRC person doing a test buy to see if you're declaring what you should be.

Do I think this is common, especially at the end of things were talking about? Hell, no, for the "don't have the resources" reason I used earlier. BUT .... it's possible, especially if dumped in it by someone else that got caught.

Also, for the record, while I'm aware of odd times this sort of thing happened in the past, my direct info is WAY out of date so I've no idea of current practices. I am aware of a couple of recent instances, once removed, of traders getting caught and dropping others in it, though.

[CAT-THE-FIFTH]

I get the cyniccism bit.

Let me say this. The tax rules have not changed. That is to say, there is no new tax liability where there wasn't one before.

What has changed is the data being passed to HMRC by selling platforms about transactions on their sites, under certain circumstances.

Another thing to bear in mind is that rarely are tax rules as simple as yes or no.

So, if you are selling personal items, i.e. having a loft clear-out, the official line from HMRC (and yes, I checked) is you probably aren't liable for paying any tax on it. But that means there are circumstances where you are.

To know for sure if tax is due, you have three basic choices (IMHO) :-

1) Spend a lot of time yourself understanding tax rules, or
2) Pay a professional to tell you, or
3) Report the "income" to HMRC, making it clear what you're doing, and see what they say.

Generally, there are things you can do to make a few quid that, if they exceed a given threshold, are taxable. One used to be renting out a room in your home. Still is, as far as I know. Up to a point, you can do so without tax, but above that, tax is due, and there are conditions to be met, like the "in your home" bit. A similar rule applies. IIRC, to "side-hustles", i.e. a very low value making of a bit of cash. Up to a point, and I think it was £1000 but it's ages since I've looked.

The problem, if you like, is that very large numbers of people are only really used to tax being deducted at source (PAYE), by their employer, and don't realise that their cake-making business, or making some money creating simple websites, or buying furniture, doing it up and selling for a profit MIGHT resuLt in taxable income.

Selling your own bits and pieces also MIGHT, though it'll be Capital Gains Tax and that usually only applies if you sell it for more than you original paid, and if the total capital gain on all items sold in a year exceed the CGT tax-free allowance (which memory tells me used to be something like £6000/year.

So a simplistic example might be buying a watch for £10 in a car boot sale 30 years ago, then getting offered £30,000 buy an antique dealer. The capital gain would be £29,990, and if the tax free allowance is £6000, and assuming you sold nothing else for a gain, then you gain £29,990-6000, or £23,990, which would be chargeable at whatever the CGT rate is.

To be clear, I'm making these figures up as an illustration, not claiming their correct and current, and the example is simplistic.

So if you sold a hifi system of high-value components, and you sold your camera gear, and some jewelry you inherited, and .... you get the picture .... what you'll possibly end up doing is making a list of the cost/value on acquisition, and the sale value, and the gain per item, because any one item might not result in tax, but a long list of them might. The solution there might, for example, be sell half this year and half next year. But it'll perhaps be more complicated if you "inherited" that jewelry or watch. At what value does it hold when YOU got it? Market value at the date you inherited it? Cost when you ancestor bought it 300 years ago?

Even where the general principle is there's no tax selling the stuff in your attic, situations can arise when there is, which is why HMRC says "probably" no tax.

To reiterate, as I understand it, tax rules and when tax is or isn't due hasn't changed. Anyone whose "side-hustle" is resulting in taxable income this year is in the same boat they were last year, if making the same income ... it MIGHT result in a tax liability, or it might not. There is no clear, simple definitive yes/no because it all depends on the detail.

Generally, as I said, HMRC aren't looking to be vindictive, and generally, will look much more kindly on people genuinely unaware, or who go to HMRC before HMRC come banging on your door. They, as I understand it, don't have much choice about some elements of rectifying even unknowing unpaid tax, because late payment interest is, IIRC, laid down in statute. But they do have discretion in applying many fines and penalties and they can be heavy if they conclude people have been deliberately dodging a genuine liability.

It's usually much less expensive to go to them, be honest and say I've been doing this, here's the details, I just found out I MIGHT owe some tax, can you help me please. They usually will.

The problem with the vagueness of all the "mights" is that every situation can be different, and without specific detail, the situation can vary. Sell two items on the same day and the total might result in tax being due, but sell one on a given day and the other the following day and it might not (PROVIDED the new tax year started between those two days).

All that's happened, as I understand it, is more data going from selling platform to HMRC automatically, which makes it more likely that those that should have been paying tax, maybe for years, but haven't been, are likely to get spat out onto an inspectors desk by their computer system. Then, that person might get a visit because of these changes in data reporting, but the fact remains that if they were trading enough in a side-hustle that they should have reported it before the changes, then they should have reported it before the changes. The onus is on us to know, or find out, if we're conducting any form of business, on any scale, whether it's large enough to generate a liability. Even if we aren't in business, but just selling off our old stuff it MIGHT carry a tax liability, but for most of us, generally won't, not least because most such selling isn't at a gain. If you think it might be, FIND OUT what the rules are and maybe stagger the selling over two years, or more.

Timing, or correct documentation, can make a big difference. Dealing with my parents estate when we lost them resuted in a tax bill of over £80,000 being avoided because we saw problem coming and changed the ownership from joint, to 50% of the property owned by each, directly. It was 100% legal, and in fact, the then-Chancellor (Gordon Brown) changed the rules a couple of years later so the default became what we'd had to do manually, and that £80k wouldn't have been at risk in the first place.

Anyone trading, side-hustle or not, really ought to find out what the situation is before HMRC come a-calling, because it might save them a fair whack being up-front about it.

But there are no simple cut and dried rules, because circumstances can vary so much, like selling half your hifi in one tax year and the other tomorrow, in the next one (if the date is, what, April 5th to 6th).

I get the cynicism, but I still think HMRC are simply trying to collect the correct tax where it has long been due, but for whatever reason, often not been forthcoming. They certainly don't have the resources to come knocking on your door with a hand out because you made a few hundred quid over what you paid for your old hifi, unless you're VERY unlucky in getting picked in a small random sample. They don't have anywhere remotely near the staff to do that, and have far better things to spend their time on, if they did. But if they can convince people to come to them, as indeed current law has required for a very long time, they'll certainly process the resulting annual tax return and cash the cheque (or bank transfer).

I think you missed the part about how they are using "AI" to automate the decision making and are saying how they need less staff to do this.HMRC did a large IT "upgrade" to the Connect system in the years before all of this was announced. So they expect to get huge quantities of additional data which needs to be analysed. So what has happened in the past is not going to be a good indication of how things are going IMHO.

Kevin Igoe, managing director of PfP says: 'Connect is now at the core of HMRC's tax investigations.

'It allows HMRC to analyse billions of data points to pinpoint taxpayers for closer scrutiny.

'It's an incredibly complex and intelligent computer system. However, the system can easily produce "false positives" and trigger investigations into innocent individuals and businesses.

'Due to the "automatic" nature of the Connect system, innocent taxpayers can end up under investigation through no fault of their own.'

Its more like they are going to use their "new and improved by AI(tm)" automated system to just analyse and send stuff out in an automatic fashion.Then if there is a problem,it will be on the addressee to sort it out. But because they lack staff to manually check it will take ages to sort anything out. Then they will hope most people will just cave in and point to the infallible computer system. It's certainly happened elsewhere with IT upgrades. Like one recently in the news.

This is why I am cynical. Everytime they automate something,be it with the Post Office,or something else it ends up being a total cockup. I don't know whether people in the UK are gluttons for punishment,but I am not going to give them the benefit of the doubt. They never acknowledge the flaws of the systems they implement until they get taken to court,or they mess up so badly the media makes a big deal of it.

But much easier to go after the public(who are not to be trusted),when they lost £21 billion of taxpayers money over the Pandemic:
https://news.sky.com/story/21bn-of-t...chdog-12845271

However,these are the same lot who blamed inflation on people asking for more pay(and most of the rises were under it). Except the inflation was already happening before people asked for extra pay. Oh,yes nothing to do with rising energy costs caused by decades of several governments not planning energy policy properly(despite having our own oil,coal and gas unlike most European countries) and kicking the can down the road.