HMRC (Her Majesty’s Revenue and Customs) have started a major crackdown on tax avoiders, focusing on the self-employed and individuals earning extra income through side hustles. Here are the key points:

1. Crackdown Scope: Starting from January 1, HMRC will target tax avoiders, specifically those who are self-employed or earning additional income through platforms like Airbnb, Fiverr, Upwork, Uber, Deliveroo, and Etsy.
2. Data Collection from Platforms: Side hustle platforms have been instructed by HMRC to record and report the cash accumulated by their users starting from the specified date. The collected data will be submitted to the tax office.
3. Comparison with Self-Assessment Income: HMRC will compare the data provided by side hustle platforms with the income reported through self-assessment by individuals using these platforms. The goal is to identify any inconsistencies.
4. Investigations for Non-Compliance: The tax office will assess the information and launch investigations if discrepancies or under-reporting of income are detected. The crackdown is aimed at individuals who fail to declare or accurately report their additional income.
5. Impact on Compliance: Individuals who correctly declare their cash will not be directly affected by the rules. The focus is on addressing non-compliance and tax avoidance.
6. Financial Investment by HMRC: HMRC plans to invest nearly £37 million in the initiative. This investment includes the employment of 24 full-time staff members dedicated to implementing and enforcing the rules.
7. Significance for Side Hustle Workers: Seb Maley, CEO of Qdos, a tax insurance provider for self-employed workers, emphasizes that the legislation may have significant implications for individuals using side hustle platforms for either full-time work or as part of their side hustles.
8. Reasons Behind the Crackdown: Maley suggests that HMRC’s initiative is driven by a lack of trust in the accuracy of income reporting by individuals with side hustles. The tax office aims to obtain information directly from platforms and cross-reference it with individuals’ tax returns.
9. Self-Employed Statistics: The UK has over four million registered self-employed individuals. A Finder’s analysis indicates that around 44% of residents have at least one additional income source in 2023.
10. Self-Assessment System: HMRC uses the self-assessment system to collect taxes from individuals who do not have taxes deducted automatically from their wages. If an individual has a side hustle and earns £1,000 or more in addition to their regular income in the tax year, they are required to register as self-employed, report income to HMRC, and pay tax on this additional income.

In summary, HMRC’s crackdown targets tax avoiders among the self-employed and those with side hustles, using data from platforms to cross-reference with self-assessment reports. The initiative aims to enhance compliance and address potential under-reporting of income.

As a general rule, you must register if:

• Your income from self-employment work was more than £1,000
• You got more than £2,500 from renting out property
• You got more than £2,500 in other untaxed income
• You had a P800 from HMRC saying you did not pay enough tax last year
• You need to prove you’re self-employed, for example, to claim Tax-Free Childcare
• You want to make voluntary Class 2 National Insurance payments to help you qualify for benefits

However, there may be other reasons to register, but you can fill out HMRC’s questionnaire to learn more. After you finish it, you will be told if you need to register, but there are other ways to do this (depending on your circumstances). If need to register, do so online or by calling the self-assessment helpline on 0300 200 3310.