Empowering the Freelance Economy

HMRC’s New Rule for Freelancer Platforms and Side Hustles: What You Need to Know

Dog walkers are among the side hustles that will be required to sign up for self-employment with HMRC
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This article was updated on 27.11.2023

For anyone with a side hustle, whether that’s making extra income from Airbnb, getting assignments through a freelancer jobs platform or selling items on Ebay, HMRC will have more data on your income

Starting January 1, 2024, Her Majesty’s Revenue and Customs (HMRC) will implement a new rule that will require freelancer platforms to report their users’ earnings to the tax office. This rule is designed to crack down on tax evasion and ensure that everyone is paying their fair share.

The rule will apply to all freelancer platforms that operate in the UK, including popular platforms such as Upwork, Fiverr, Airbnb, and Uber. These platforms will be required to report to HMRC the total amount of income that each user earns through their platform.

If there is a discrepancy between what the platform and the seller have reported, the tax office could have grounds to investigate the individual, according to contractor insurer Qdos. This could also imply that HMRC could look retrospectively at your earnings for previous years and what you have reported to HMRC.

Don’t look at the new rules as a threat

Rather than look at these rules as a threat, freelancers using platforms should take advantage of the fact that the platform can provide you with up-to-date information on your earnings to date since joining the platform and what you owe in tax. Using this information can help you set up a standard order to a separate savings account set aside for your tax. Some freelancers on the other hand prefer to set up a direct debit with HMRC to pay a certain amount every month to go towards their expected tax bill. That way come time to pay your bill in full you will not have such a sizeable amount to pay and will receive a refund if you have overpaid.

What to do if you can’t pay your tax bill on time – Freelance Informer

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HMRC will then use this information to identify taxpayers who may be under-reporting their income. If HMRC finds that a taxpayer has not reported all of their income, they may be subject to a penalty or even prosecution.

The new rule is part of a wider effort by HMRC to clamp down on tax evasion. In recent years, HMRC has increased its focus on the gig economy, where many people are now working as freelancers or contractors.

HMRC says that the new rule is necessary to ensure that everyone is paying their fair share of tax. The agency says that it is estimated that £1.2 billion in tax is lost each year due to tax evasion in the gig economy.

The new rule has been welcomed by some tax experts, who say that it will help to create a fairer tax system. However, other experts have expressed concerns about the rule, saying that it could be burdensome for freelancer platforms and that it could lead to an increase in tax audits.

What does this mean for freelancers and side hustlers?

If you are a freelancer or side hustler, you should be aware of the new rule and make sure that you are reporting all of your income to HMRC.

If you earn more than £1,000 from freelancing or side hustling in a tax year, you must register as self-employed with HMRC. You will then need to file a self-assessment tax return each year and pay any tax that you owe. This is regardless if you earn more than £1000 as a freelance consultant or dog walker.

The new rule does not change your obligation to report your income to HMRC. However, it does mean that HMRC will have more information about your earnings, so it is important to make sure that you are reporting all of your income accurately. There could be a chance that HMRC could ask the platform you work for to provide earnings to date including multiple years.

How can you prepare for the new rule?

  • Make sure that you are registered as self-employed with HMRC
  • Keep accurate records of your income and expenses so you can file them.
  • Take advantage of your freelance job platform’s reporting capabilities to help you determine your monthly and yearly earnings and tax obligations
  • File a self-assessment tax return each year and pay any tax that you owe.
  • If you have any questions about the new rule or your tax obligations, contact HMRC for advice. If you are concerned that your worker status has been jeopardised (inside v. outside IR35) due to the recruitment agency, end client or umbrella company you get paid through, seek professional advice from contractor insurers including IR35 Shield and Qdos. If you want to ensure your worker status is correct or you are receiving the correct amount of holiday pay or not have your pay cheque skimmed in some way contact either PayePass or Contractor Voice.

HMRC has also published a number of resources to help freelancers and side hustlers understand their tax obligations. These resources can be found on the HMRC website.

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  1. Jean says

    Wonderful, IF you can actually register as self employed. Freelancers without a UK postal code or without a UK address cannot register as the identity verification on gov.uk fails 100% without a UK verified address. Freelancers without an address in the UK but who still make income from UK citizens, will have to register as self employed by post and then, after all of that, will still not be able to fill in the form online or manage any of their tax affairs in the UK. For freelancers who travel a lot this is going to be a nightmare. Service agents at HMRC merely directs users to phone the helpline, which is not exactly helpful for foreign citizens.

  2. K says

    Some of the major corporates like Amazon, Apple, eBay, Facebook, Google, Microsoft and Starbucks avoid tax through complex organisational structures. They have networks of banks, lawyers and accountants to create convoluted and secret financial structures, which reduce transparency and enable tax avoidance.

  3. Aidan Bree says

    Let’s ignore all the multi-billion pound companies paying little or no tax and concentrate efforts on hard-working people trying to make a few quid extra

  4. Darren B says

    I find it ridiculous to tax people trying to get extra cash during these trying times. The cost of living is getting ridiculous.

    £1.2 Billion is nothing compared to the real amount that the HMRC could gain from big companies. In a hypothetical situation, let’s say the total reported profits of these companies subject to taxation in the UK is £100 billion. If these companies are currently paying taxes at an effective rate of 20% due to various tax planning strategies, the tax paid is £20 billion. If they were to pay at the full rate of 22% due to improved compliance, they would pay £22 billion.

    If big companies pay their taxes correctly and in full, the country can potentially benefit in several ways:

    Increased Tax Revenue: The most direct benefit is a boost in tax revenue for the government. This revenue can be utilized to fund public services and infrastructure, such as healthcare, education, transportation, and public safety.

    Budget Allocation and Public Services: The additional tax revenue allows the government to allocate funds to essential public services and programs that benefit the population, enhancing the overall quality of life for citizens.

    Reduced Budget Deficit: Increased tax revenue can contribute to reducing budget deficits, helping the government maintain fiscal discipline and sustainability in its financial operations.

    Investment in Development Initiatives: Governments can use the additional funds for development initiatives that stimulate economic growth, create jobs, and improve the country’s competitiveness on the global stage.

    Poverty Reduction and Social Welfare: Improved tax collection and revenue enable targeted programs to combat poverty and improve social welfare, supporting vulnerable populations and reducing income inequality.

    Better Infrastructure and Connectivity: Investments in infrastructure projects, such as roads, bridges, ports, and utilities, can be funded, leading to improved connectivity and enhanced business environments.

    Healthcare and Education Enhancements: The additional funds can be directed towards improving healthcare and education systems, ensuring better access, higher quality, and expanded coverage for citizens.

    Environmental Sustainability Initiatives: Funding environmental protection and sustainable development projects, such as renewable energy programs or conservation efforts, can contribute to a healthier and more sustainable future.

    Public Safety and Security: Adequate funding for law enforcement and security measures helps maintain law and order, ensuring a safe environment for citizens and businesses.

    Investor Confidence and Economic Stability: Demonstrating effective tax collection and compliance mechanisms fosters investor confidence, attracting more investment into the country and contributing to economic stability and growth.

    Social Services and Support Programs: Provision of social services like elderly care, disability support, mental health services, and other community programs can be significantly enhanced with increased tax revenues.

    The implementation of such regressive tax policies upon the hardworking citizens of our nation is utterly preposterous and morally indefensible.

  5. Anthony says

    What an absolute joke, HMRC should take a good look at itself and the poor way it deals with the super rich. they have lawyers and accountants who run rings around them. They are happy going after low hanging fruits.

    These companies will be given tax breaks in exchange for telling on those who make their platforms successful.

    I believe it is lazy to go after people in this way when by contrast millionaires and billionaires can choose how much tax they pay.
    at the opposite end we have people in this country doing: YouTube, Cryptocurrency and taking benefits at the same time.

    Cut down the benefits for people with unproven health conditions or no health issues below the age of 30, these are the best time to be alive for this group yet many and disillusioned by the world of work, with such poor wages drive down by greedy people.
    I say increase wages, to encourage work. The rich can have less shares and dividends so that everyone else can have a little bit more to live on. We are a nation with massive inequalities and that’s is sickening.

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