BDO warns those with online side hustles that HMRC will be able to crosscheck incomes for the first time.
People needing to file a Self-Assessment tax return for the first time are being warned they will need to register before 5 October or run the risk of incurring penalties.
The registration deadline could apply to the newly self-employed, new landlords or new partners in business partnerships – and importantly, those using online platforms to generate income.
On 1 January 2024, new information collection rules came into force which oblige digital platforms to collect and report information to HMRC about the income of sellers on their platform.
The first reporting deadline for these platform operators is 31 January 2025. This means that those using websites to sell goods, let out short term property or secure private hire or food delivery work will need to make doubly sure they accurately report their earnings to HMRC – and register for a Self-Assessment tax return if required.
This year, for the first time, the tax authority will be able to crosscheck individuals’ declarations against data received from online platforms. As these are international OECD rules, this information will be shared across borders.
Dawn Register, Head of BDO’s Private Client Services in London said:
“There will be many people whose personal or financial circumstances changed in the 2023/24 tax year and who will have to file a tax return for the first time. This will include many impacted by fiscal drag, who will have been pulled into paying tax for the first time or who are caught by the high income child benefit charge.
“It’s very important that if you are required to file for the first time that you meet the 5 October deadline to register with HMRC.
“Failure to do so will increase the risk that you will file late and receive an automatic late filing penalty. The deadline to file a paper tax return is in most cases 31 October 2024 and the deadline for submitting an online return is midnight on 31 January 2025.
“It’s worth remembering that ignorance of the rules will not always be an acceptable excuse in HMRC’s eyes.
“It’s especially important this year that those who earn money via online platforms check whether they need to register. Digital platforms will be required to report users’ income to HMRC for the first time in January 2025. This will mean the tax authority will be able to crosscheck declarations from individual taxpayers in a way that they have been unable to do so before.”
You are required to send a tax return if, in the last tax year (6 April 2023 to 5 April 2024), you were self-employed as a ‘sole trader’ and earned more than £1,000, a partner in a business partnership, had a total taxable income of more than £150K, had to pay capital gains tax on a disposal of an asset that increased in value or were liable for the High Income Child Benefit Charge.
Other reasons to file a return might include needing to declare money from renting out a property, tips and commissions, income from savings, investments and dividends and foreign income.
Those wanting to check whether they need to file a tax return can use HMRC’s free tool here.
