The Side Hustle Tax - Explained for Resellers
Confused about the Side Hustle Tax affecting Resellers? We have your back.
Reselling Law Change in 2024: The Side Hustle Tax Explained
There has been a pretty big change to UK Tax in 2024, which is incredibly important for resellers such as ourselves. In this article, I'll explain everything about this tax change, and how SellerFuse can assist any resellers who may be worried by this news.
Let's face it, the last thing anybody wants is an audit from HMRC.
Firstly, for any Amazon FBA Sellers that are reading this, it shouldn't affect you too much. You should already be registered as a company & most sellers will be VAT registered. If you sell on eBay also, you should be adding this to your tax return.
The Side Hustle Tax is aimed towards Online Sellers that make money, but aren't registered as a company. So if you sell on eBay, Vinted, basically any marketplace, HMRC require sellers to provide a tax return.
It's confusing many online sellers, however, this is not actually a new tax... all sellers should have been reporting any sales income to HMRC.
What this Tax change in 2024 does though, is require the platforms such as eBay, Etsy, Vinted etc to publish and share all Sale Transactions to HMRC. So if you've avoided, or forgotten to advise HMRC that you're making money online, Online Selling Platforms will now hand the data over to them directly.
There has been some concerns over this. Let's face it, people who weren't paying tax on profits now have an extra 20% fee which they need to pay, so profit margins will take a hit. However, I think this is a positive move overall and it will help to stop brickers. I'll explain why shortly.
As I have already advised, this is quite a confusing tax. Many people were worried that if they sell online recreationally, they would have to pay taxes on their sales. For example, if you sold your used Sofa.
HMRC have advised that Every Person in the UK has a tax-free trading allowance of £1000 in additional income, alongside their regular employment. This means, if you’re employed full-time and earn less than £1,000 from your side hustle, you don't have to pay any additional tax.
If you sell more than the £1,000 allowance, you will be required to complete a self-assessment. It's unclear whether you will be asked to do so, or expected to do so. HMRC have already advised heavy fines will be handed out, so it's not worth waiting to be asked.
Will the Side Hustle Tax affect me?
At SellerFuse we offer tools for various sellers. Ebay Sellers. Event / Ticket Resellers and Amazon FBA Sellers. This will affect a lot of sellers. However, we understand that SellerFuse is used mainly by Amazon Sellers.
For that reason, the side hustle tax shouldn't affect you at all. You'll already be registered as a business, purchasing stock through your business accounts, therefore paying Tax on your Profits.
This isn't an extra tax for online sellers.
How Can I work out the Tax I owe?
This isn't an easy one to answer, but for most sellers, it would be a good idea to store away 22-25% of your Profits from your eBay, Etsy or other platform (excluding Amazon) sales.
Most sellers will be paying around 20%, but if you account for a little bit more, you'll have a nice little bonus after paying your taxes.
Our Reselling Hub allows Sellers to track their sales from eBay, Etsy etc and also track your exact profitability. From here, we provide a guideline for your estimated Tax Bills. Note, this is only an estimate and we are not liable for any Tax requirements, but provide this to give you a rough figure.
As always, if we can help, we will help.
Who is affected by this Tax?
When this new regulation was announced, it was hit with Dismay from many online sellers. They felt that they were being targeted by the Tax Man. However, this is not a new tax, it's just something that HMRC are now starting to enforce.
It's not just eBay Resellers, Ticket Touts and other Hustlers that are being targeted either.
Uber Eats Delivery Drivers, Podcast Owners & YouTube Creators are also going to be liable to this. Side Hustles are exploding right now, and Aviva have noted that 2 in 10 people are earning supplementary income to top up their wages.
The average amount of profit earnt by those, is a whopping £501. Now you can see why the Tax Man is starting to investigate!
Money earnt from Side Hustles are paid tax free, meaning that the sellers have to be responsible for paying these. However, this recent law change shows that a high percentage of sellers didn't even know this rule existed.
Can this Side Hustle Tax be Positive for Resellers?
Obviously, seeing the local authorities start to clamp down on profitable avenues is enough to worry any seller. However, on the flip side, sellers should have been paying taxes on profits from the start.
Some people will see this as a barrier, and will likely stop reselling. This reduces competition for sellers on places like eBay, but on the flip side it could take longer for items to go Out of Stock.
Flipping the flip side, you can turn this into another positive. It means there would potentially be more stock for yourself to buy.
Another definite benefit will be that this will remove the brickers from the game. Frustratingly, there are sellers who disregard the information that cook groups give them, happy with any form of profit.
This can be margins as low as 10%, which long term just doesn't work out. One return and you're working at a loss.
They will not be able to reduce their prices much more to account for the additional tax they are required to pay. So this move will eventually force them out of reselling completely.
So although you may be concerned about the impact that this tax will have on your business, I hope that we have provided sufficient examples of how it can be a positive.
Remember, at SellerFuse we support Resellers with industry leading software. We are always developing more features, and if there's anything you'd like us to add... just place a feature request!