The side hustle HMRC already knew about before I told them

The email arrived in January, from the marketplace rather than from HMRC, and it was almost aggressively boring. It set out the information the platform had reported about my account for the previous calendar year: my name, my address, my date of birth, the total paid to me, the number of transactions, and the fees they had taken.

That was the moment the side hustle stopped being a private arrangement between me and my spare evenings. It was not a demand, an investigation or a threat. It was just a copy of a file that had already gone somewhere else.

What the platforms actually send, and since when

From 1 January 2024, UK digital platforms have been required to collect and report seller information to HMRC once a year under rules based on an OECD model. That covers marketplaces for goods like eBay, Etsy and Vinted, accommodation platforms like Airbnb, and platforms for personal services and freelance work.

The first reports covered the 2024 calendar year and were due by 31 January 2025, and the same cycle has run every year since. Reported data includes the seller's name, address, date of birth, tax identification number where held, total consideration paid over the year, the number of transactions and any fees or commission withheld. Platforms must also give the seller a copy of what they have sent, which is the email that landed in my inbox.

There is a de minimis: platforms are not required to report on sellers of goods who made fewer than 30 sales in the reportable year and received less than around £1,700. Above either of those, you are in the file.

This was never a new tax. It closed the gap between what HMRC could ask for and what HMRC simply has, and that changes the odds on doing nothing.

What it does not mean

It is worth being precise, because a lot of the coverage at the time was not. Being reported does not mean you owe tax. It does not mean you have to file a tax return. And selling your own second-hand belongings — clearing the loft, moving house, offloading clothes the children have grown out of — is not trading and is not taxable, however many items it runs to.

What it means is narrower and more useful: HMRC now holds a figure for what several million people were paid online, and can compare it against what those people declared. Where the two do not match, the mismatch is visible without anyone having to go looking.

The £1,000 that is not what most people think it is

The trading allowance lets you earn up to £1,000 from self-employment or casual trading in a tax year without paying tax on it or registering. It is the single most misunderstood number in personal tax, for one reason: it applies to gross income, not profit.

So if you sold £3,400 of handmade goods and spent £2,600 on materials, packaging and platform fees, your profit is £800 — comfortably under a thousand pounds, and completely irrelevant. The test is the £3,400. You have exceeded the allowance and you need to register.

The deadline is 5 October following the end of the tax year in which you crossed it. Cross it during the year to 5 April 2026 and you should have registered by 5 October 2026, which is a date worth putting in a calendar now rather than discovering in January.

What changes from April 2027

There is a change coming that is helpful and widely misreported. From the 2027/28 tax year, the Self Assessment reporting threshold for trading income rises from £1,000 to £3,000 of gross income.

The trading allowance itself is not changing. You still only get £1,000 tax-free. What changes is the paperwork: if your gross trading income sits between £1,000 and £3,000, you will no longer need to file a full Self Assessment return, and HMRC intends to provide a simpler online service to declare and pay what is owed on the amount above £1,000.

That is a genuine reduction in admin for a lot of small side hustles. It is not a tax cut, and reading it as one is how people end up with an unexpected bill.

The bit that actually caught me out: badges of trade

My side hustle started as clearing out a collection, which is not trading. It became trading somewhere in the middle, and I could not have told you the exact week.

The distinction turns on what are traditionally called the badges of trade: whether you bought the items with the intention of selling them at a profit, how frequently you transact, whether you modify or improve goods to make them more saleable, how quickly you sell after buying, and whether the activity is organised in a businesslike way. No single badge decides it; the picture as a whole does.

Selling a bike you no longer ride is not trading. Buying three bikes at auction, refurbishing them and listing them is, and it was trading from the first one — not from whenever it started to feel like a business. The organised, repeated, bought-to-sell pattern is what matters, and the moment you can describe what you do as sourcing stock, you have almost certainly answered the question.

What I should have done from month one

Four things, none of which are difficult, and all of which are far easier done from the start than reconstructed later.

Keep a separate account. Not a business account necessarily — a second personal current account is enough at the beginning — but a place where the money in and the money out for this activity live on their own. Reconstructing eighteen months of side-hustle income out of a personal account that also contains a mortgage and a supermarket habit is genuinely miserable work.

Record gross, not net. Platforms pay you after deducting fees, so what lands in your bank is not what you were paid. Your gross income is the figure before fees, and that is the figure the £1,000 test and the platform's report to HMRC both use. Someone with £1,050 gross and £120 of fees sees £930 in the bank and reasonably assumes they are under the threshold. They are not.

Keep receipts for what you buy to sell. Cost of goods, postage, packaging and platform fees are all deductible against trading income if you claim actual expenses rather than the allowance. Without records you cannot claim them, and the tax is calculated on a much larger number than it should be.

Set money aside from day one. A rough 25% to 30% of profit into a separate pot covers income tax and Class 4 National Insurance for most basic-rate side hustlers with a day job, and turns January into an administrative event rather than a financial one. The same discipline applies whether you are selling online or freelancing, and it is the single habit that separates the people who find self-employment stressful from the people who do not — see also no sick pay when you work for yourself for the other half of that argument.

Where this is all heading

It is worth seeing the platform reporting rules as one part of something larger rather than as an isolated annoyance. Making Tax Digital for Income Tax is arriving in stages for sole traders and landlords by income level, bringing quarterly updates and digital record-keeping with it. The direction is consistent: more frequent reporting, more third-party data, and less room for a shoebox of receipts and a heroic evening in January. What that means in practice is set out in Making Tax Digital: what it actually means if you're a sole trader.

The practical response is not to worry about being caught. It is to run the side hustle from the beginning as though the numbers will be checked, because they now routinely are. That takes about twenty minutes a month, and it removes the low-grade unease that most people running something on the side carry around without ever quite naming it. If the thing grows to the point where it needs actual funding rather than tidy records, funding options when you're a sole trader or freelancer covers what is realistically available.

Common questions

Do I have to tell HMRC if I sell my own old clothes on Vinted?

No. Selling personal possessions you already owned is not trading, and there is no tax on it however many items you get through, so a big wardrobe clear-out creates no obligation at all. The platform may still report your account to HMRC if you pass the reporting thresholds of 30 sales or around £1,700 in a year, but being reported and owing tax are two different things. The only common exception is capital gains on individual personal items sold for more than £6,000, which realistically affects jewellery, art and antiques rather than second-hand clothing.

Is the £1,000 trading allowance based on profit or turnover?

Gross income, before any costs. This is the detail that catches most people out. If you took £2,800 from online sales and spent £2,100 on stock, materials and fees, your profit is £700 but your gross income is £2,800, so you have exceeded the allowance and need to register for Self Assessment. If your gross income is under £1,000 you can ignore it entirely. If it is over, you choose between deducting the £1,000 allowance or claiming your actual expenses, whichever leaves you better off, but you cannot do both.

The platform sent me a copy of what it reported. What should I do with it?

Save it, and check it against your own records for the same period. It shows the gross figure HMRC has been given, which will usually be higher than what reached your bank because fees are deducted before payout. If it broadly matches what you have declared, there is nothing to do beyond filing it. If it is materially higher, work out why before January rather than after: the common causes are counting net receipts instead of gross, forgetting a second account or platform, or a genuine misclassification by the platform, which you can ask them to correct.

What happens if I should have registered and didn't?

Register now and tell HMRC yourself rather than waiting. Unprompted disclosures attract substantially lower penalties than the same information arriving after HMRC has raised it, and the penalty regime is explicitly built around that distinction. You will owe the tax and interest for the years concerned, plus a penalty that depends on whether the failure was careless or deliberate and on whether you came forward voluntarily. For most modest side hustles the numbers are far smaller than the anxiety suggests, and the process is a form and a payment plan rather than an investigation.