Extra income: trade or hobby?

HMRC has a new online checker to help those with sources of income outside PAYE decide if they need to register for self assessment.

Whether it’s letting out land or property through an online marketplace; or creating online content and earning through advertising or sponsorship on social media channels, income classed as trading is potentially taxable, and it’s important to make sure you’re on the right side of the rules.

HMRC’s tool can be used if you sell goods or services; rent out land or property; or create online content. It takes users through a series of yes/no questions, signposting to HMRC guidance, and finally suggesting whether they should register for self assessment and complete a tax return.

It's all part of HMRC’s drive to make sure taxable income doesn’t slip through the net. As such, it sits alongside other developments, like the new rules from January 2024, requiring the operators of digital platforms like Airbnb and Etsy to provide yearly reports on those using them. Reports are now needed unless users earn no more than 2,000 euros, or make fewer than 30 sales per year. It doesn’t follow, however, that where no report is made, there is no tax liability: and while HMRC’s online tool for additional income certainly makes a starting point, we recommend taking professional advice. If you have any queries in these areas, we are always on hand to help.