October 2023

HMRC’s Income Tax Changes to Clamp Down on Side Hustles

New HMRC rules on Income Tax are due to take effect on 1st January 2024, targeting those actively making significant money from side hustles – whether it’s profiting from selling crafts & hobby items online or renting out a place on Airbnb, for example, you could be caught out unless your tax affairs are in order1.

In the aftermath of the Covid pandemic and as the Cost-of-Living crisis squeezed disposable incomes further, it’s no doubting that many have sought to make an additional income on top of their day jobs, so these changes by the HMRC are a response to the growing volume of people making money but not declaring it via the traditional manner1.

The HMRC have recently invested over £36m in establishing a dedicated team to monitor online sales, and big firms such as eBay, Uber and Airbnb are now being required to report seller’s income to HMRC1. This means that big sellers online or those making a few pounds on the side as a delivery driver or casually renting out your home via an online platform could land you in hot water if you don’t declare your income fully.

Who does it affect?

Many of us may be familiar with using buying & selling platforms such as eBay to sell secondhand goods or clothing, and according to tax experts, provided you are not considered a ‘trader’ by the HMRC, then you will be fine to continue as you are – but if your purpose is to buy-to-sell, or make considerable volumes of craft items that are purposely to be sold at profit, then you could be affected by the changes1.

Anyone who earns less than £1,000 a year in side-gigs does not have to pay tax or declare income, thanks to the Trading Allowance currently in place2. However, earnings above this amount do need to be declared and would be subject to income tax and national insurance, under the new HMRC regulations.

Recent years have seen a huge rise in popularity of room-rental opportunities, with online platforms such as Airbnb making it easy to make substantial second incomes from short term rental bookings. Under the Government’s ‘Rent a Room Scheme’, you are permitted to earn up to £7,500 a year tax-free from letting out furnished accommodation3, however, if you go above this amount then you must contact HMRC and request that your tax code is changed, or complete one of their self-assessment tax returns.

How to know if you are eligible

Whether you’re eligible to pay tax on online sales depends on whether you are classed as a ‘trader’ by the HMRC. The HMRC may decide this if you buy and sell online regularly with the aim of making a profit4. You can check how HMRC views your circumstances at www.gov.uk/check-additional-income-tax.

It’s important to clarify that these new rules are not aimed at the average person clearing out their attic and selling unwanted items online without intending to make a profit, and this is unlikely to be classified as trading, even if you exceed your £1,000 allowance1.

Similarly, if you occasionally make cakes for friends and family and they pay you small sums to say thank you, then you may not have to pay tax on it. The intention behind the HMRC income tax changes are to ensure fair payment of income tax from prolific online sellers running a commercial enterprise, or making large volumes of income from services that would previously go unrecorded on self-assessment tax forms1. However, there are doubtless grey areas as to exactly what is defined within the new regulations, so if you are in any doubt, it’s advisable to speak to the HMRC or to seek independent financial advice from a trained professional.

If you are concerned regarding an historical income, it is also worthwhile contacting the HMRC, it pays to be proactive and disclose any dealings upfront, then it may result in receiving a less-harsh penalty than you might otherwise receive1.

When are the deadlines?

Any income for the tax year ending on April 5, 2023 need to be reported to HMRC by January 31 next year1.

As always, it’s worth seeking independent financial advice if you have any queries regarding your position.

Sources

  1. This is Money (2023) Is the taxman coming for YOUR side hustle? Airbnb, Ebay and Uber to hand over income data directly to HMRC. Available at: https://www.thisismoney.co.uk/money/bills/article-12640869/Is-taxman-coming-hustle-Airbnb-Ebay-Uber-hand-income-data-directly-HMRC.html (Accessed 18 Oct 2023)
  2. The Times Money Mentor (2023) Side hustles: the crucial £1,000 tax rule. Available at: https://www.thetimes.co.uk/money-mentor/article/side-hustle-tax-uk-need-to-pay-hmrc/ (Accessed 18 Oct 2023)
  3. Gov.UK (2023) Guidance: HS223 Rent a Room Scheme (2023). Available at: https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2023 (Accessed 18 Oct 2023)
  4. Gov.UK (2023) HMRC Business Income Manual. Available at: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20060 (Accessed 18 Oct 2023)

All the information in this article is correct as of the publish date 26th October 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

Reduce Your Outgoings by Checking the Basics

Times are hard right now, and if you’re struggling to balance your income against the outgoings, then one action that you can see if you can save money by checking to see if you’re paying too much for utilities each month.

Council Tax – You might be able to get money off your council tax – either Council Tax Reduction or a discount. If you’re on a low income or claim benefits, you might be able to get Council Tax Reduction. Each local council runs its own scheme, so what you can get depends on where you live.1

You might be able to get a council tax discount for your property – for example, if:

  • no one lives there
  • you live alone
  • you live alone apart from a live-in care worker
  • people you live with are full-time students or apprentices
  • someone you live with has a severe mental disability
  • you need a bigger property because someone has a disability

You can find out about getting a council tax discount on GOV.UK.

Gas & Electricity – The energy market has had a turbulent time over the last two years, however recently the wholesale cost of energy has fallen2, and there may be opportunities to either find a cheaper tariff from your existing supplier, or look around for more attractive deals from competitors. It’s worth doing the homework and shopping around just to see if you could be on a different plan that better fits your energy usage needs.

If you are finding it difficult to pay your energy bills, be sure to mention this to your supplier and they may be able to assist you with a manageable payment plan – it’s important not to keep the head below the sand here and be upfront with your supplier if you foresee any financial issues on the horizon.

You can also get extra help from your gas and electricity supplier by signing up to the Priority Services Register3. You can sign up if you’re either:

  • of State Pension age
  • disabled or have a long-term health condition
  • considered ‘vulnerable’ by your energy network

You can check who your electricity network operator is on the Power Cut 105 website.

Water Bills – Use the Consumer Council for Water calculator to check if having a water meter installed could save you money. If you’re on a low income you might be able to get a cheaper rate from your water company. This is called a social tariff. Find out more about social tariffs on the Consumer Council for Water website.

Sources

  1. Gov.UK (2023) How Council Tax works. Available at: https://www.gov.uk/council-tax/who-has-to-pay (Accessed 18 Oct 2023)
  2. Ofgem (2023) Switch supplier or energy tariff. Available at: https://www.ofgem.gov.uk/information-consumers/energy-advice-households/switching-energy-tariff-or-supplier (Accessed 18 Oct 2023)
  3. Ofgem (2023) Get help from your supplier – Priority Services Register. Available at: https://www.ofgem.gov.uk/information-consumers/energy-advice-households/getting-extra-help-priority-services-register (Accessed 18 Oct 2023)

All the information in this article is correct as of the publish date 26th October 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information

Invest in Your Property to Reduce Energy Consumption

As the nights draw in, the thoughts soon head towards the inevitable question – ‘when to switch the heating on?’ With rocketing energy prices over the last couple of years, that suddenly becomes a more expensive question to answer, so we’ve highlighted a few areas where choice investment in your home may help you save money in the long run, and could even make it more attractive to buyers when you come to sell it on.

Insulation

Poor insulation leads to 45 per cent of heat loss1. Cavity wall insulation stores heat within inner walls, while loft insulation sits between the joists in the roof space. It’s also with considering floor insulation too.

The costs of insulating a home can vary widely dependant upon the size of the property and other elements such as how it has been built all affecting the final costs. The Energy Savings Trust estimate a cost of between £8,500-£12,000 to fully insulate the average three-bedroom semi-detached house2 – so it’s not a cheap undertaking by any stretch of the imagination, however according to their findings, the resultant savings in energy bills can soon help to mitigate this expense within just a few years2.

Solar Power

Solar panels convert sunlight into electricity and can be a way of reducing your electricity bills by selling electricity generated by your panels to the National Grid under the Smart Export Guarantee tariffs scheme3

Depending on the size of your roof and the number of panels you have, prices can start from £5,000 for a three-bedroom house, according to the Federation of Master Builders. However, effective capture of solar energy depends on the weather and the siting of the panels, with the optimum placing being on a south-facing roof. It can take some time for the investment in solar panels to re-coup itself, however with energy bills presently being at a high level, the current rate is approximately between 7-9 years4.

Heat pumps

New gas boilers are due to be illegal by 2035, and the Government are instead offering a £7,500 subsidy for those choosing to fit heat pumps to properties5.

However, the downside is that the high average cost of installing a heat pump can be off-putting – with latest data suggesting that it can cost between £7k-£15k to fit an air source heat pump, and between £17k-£35k to fit a ground source heat pump to the average home6.

Double Glazing

Double or triple glazing will help cut energy bills but, without blinds and particularly if the windows are south facing, double glazing can magnify the effect of sunshine and cause overheating. 

Double glazing a typical three-bedroom home today is likely to cost around £11,050 on average, according to research by The Eco Experts, however it’s also estimated to save around £195 a year on heating bills, as well as added benefits from an increased security and reduced noise perspective too7.

Low energy lighting

According to research from the Energy Saving Trust, if all 28 million homes in Britain switched to 100% LED bulbs, we could save 1.7 million tonnes of CO2 emissions annually. Replacing every bulb in a typical house with LED lights could cut carbon dioxide emissions by 75 per cent8.

A traditional halogen bulb lasts around two years or 2000 hours, based on three hours’ daily use. An LED under similar conditions lasts 10,000 hours upwards, for 10 years or longer. You can save £2 to £3 per year for every traditional halogen bulb you switch to a similarly bright LED bulb8.

Upgrading a boiler

Modern gas boilers can save you money, particularly if you have an older model, as well as reduce the amount of CO2 emitted. Upgrading to a new modern combi boiler is likely to save you between 20-35% on your gas bills. The older the boiler, the less efficient it will be, so a new one can start to instantly repay your costs by reducing heating costs immediately. ‘A’ rated boilers, including installation, can start from £1,000-£2,000.9

Sources

  1. Energy Savings Trust (2023) Solid Wall Insulation. Available at: https://energysavingtrust.org.uk/advice/solid-wall-insulation/ (Accessed 19 Oct 2023)

All the information in this article is correct as of the publish date 26th October 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

Breakdown Cover: Don’t Just Accept Your Renewal Premium

We have all become accustomed to paying the ticket price on items purchased in a shop and not daring to ask for a lower price. Obviously, there would be chaos in supermarkets up and down the land, if we all tried to ask for lower prices at the till, but the art of negotiating for the goods and services we purchase has almost died out.

Some of us don’t have the time to argue and many of us may be too embarrassed or just fear having our offer rejected, and there’s certainly little chance to ask for a discount at an online retailer. Yet, while there is plenty of encouragement to find the cheapest deals, the prices are set by the sellers. How much of a better deal could you get if you just asked for a lower price?

This is particularly pertinent to the charging for car breakdown cover. Providers rely on customer inertia NOT to take action when the renewal notice drops on the mat, even if the premium is significantly greater than the previous year.

Research suggests that as many as 78% of UK car owners have some form of breakdown cover1, but with the current squeeze on household incomes, it may seem an attractive idea to cut out peripheral costs such as breakdown cover and ‘go it alone’ out on the roads.

However, it can cost as much as £150-£300 to recover a broken-down car from a motorway or A-road2, and paired with the additional peace of mind brought about by having breakdown cover, you may wish to explore how you can continue to enjoy the benefits, but at a reduced price.

Time for a little negotiation

It pays to do your homework, when it comes to renewal time. When you receive your quote through, take a quick look online to see the costs of similar cover with rival firms, and then simply give your existing breakdown cover supplier a call, and ask them to justify the price, explaining that you have seen similar cover for less online – can they price-match or beat the quotes from competitors?

Chances are, you could be surprised at the results, as the breakdown cover supplier seeks to do what they can to retain you as a customer rather than to let you go to a competing firm. With household budgets under pressure from all angles, it makes sense to do just a few minutes legwork to see what you could save – to not only enjoy the continued peace of mind from having breakdown cover, but peace of mind that you’ve got it for a great price too.

Sources

  1. RAC (2019) ​British drivers unprepared for winter weather breakdowns. Available at: https://tinyurl.com/mrxfahpj (Accessed 19 Oct 2023)

All the information in this article is correct as of the publish date 26th October 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

Send us a message

    • This website is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply
  • This field is for validation purposes and should be left unchanged.
Want to chat?