Are you ‘hustling’ this Christmas? From hobby to taxable business

Christmas is coming and many people use the celebration time to sell items such as handmade Christmas cards and goods on seasonal market stalls. Influencers and content creators may receive Christmas gifts in return for social media promotion and more people will log onto platforms such as eBay and Etsy for their Christmas present buying. However, what to the sellers may seem to be a hobby, may not be so viewed by HMRC.

‘Help for hustles’ campaign

HMRC’s guidelines are explicit – if a seller makes money from selling goods or services (e.g. tutoring or dog walking) with the intention to make a profit (even on a small scale), it can count as a business potentially liable for both tax and NIC. HMRC's ‘help for hustles’ campaign reminds anyone earning extra income from such activities that they must inform HMRC if they earn more than £1,000 (being the amount of the ‘trading allowance’).

The campaign specifically targets seasonal traders, explaining the distinction between selling unwanted personal belongings (which usually do not require reporting), and trading activities that may be taxable. The ‘campaign’ is shown on a website page, but HMRC also issues letters to those sellers it believes may be in business (including sellers identified from viewing social media platforms) that they may be in business.

Online platforms

In December 2024, HMRC issued a press release titled No tax changes for online sellers, confirming that platforms such as eBay and Etsy – and even Deliveroo, Airbnb and Amazon – would be required to share sales data and personal information with HMRC. The declaration is of the seller’s name, address, date of birth, NI number and details of sales (both number of transactions and gross proceeds). According to HMRC’s guidance, platforms must report sellers who either make 30 or more sales in a year or earn in excess of €2,000 (approximately £1,700) in gross sales. Platform operators are required to give the individual a copy of the data reported to HMRC.

‘Badges of trade’

Whether the selling comes under the heading of a ‘trade’ depends on whether HMRC judges any one of the nine ‘badges of trade’ to be present. It is not necessary for all ‘badges’ to be present – the existence of just one can be enough. Clearly some badges carry greater weight than others, given differing circumstances.

The nine ‘badges of trade’ listed under HMRC’s Business Income Manual at BIM20205 are:

• profit-seeking motive;

• number of transactions;

• nature of the asset;

• existence of similar trading transactions;

• changes to the asset;

• method of sale;

• source of finance;

• interval of time between purchase and sale; and

• method of acquisition.

Trading allowance

Tax will be chargeable on any income less expenses, taxed at the taxpayer’s highest rate of tax. There is a trading allowance of £1,000, which can be set against income from trading activities. If gross income is below this threshold, the sales do not have to be reported to HMRC. Above this amount, the allowance can be deducted from the gross income and tax and NICs paid on the excess, as applicable.

Instead of claiming the trading allowance, any expenses incurred wholly and exclusively in carrying on the activity can be deducted to calculate the taxable income. If a loss arises, it may be beneficial not to claim the allowance as the loss could be deducted from other income when calculating any overall income tax liability. 

Non-cash benefits

Many influencers receive non-cash benefits (e.g. free products or services received in exchange for a promotion or review). To comply with tax rules, these items should be valued and reported as trading income and added to any cash that may have been received.

Practical point

HMRC provides an online checker tool to help individuals determine their need to report additional income, along with guidance on how to navigate tax implications related to side hustles.

Disclaimer

This article is not intended to be tax advice. Each person's tax circumstances are different; therefore, we recommend that you contact us for personalized tax advice. Sam Niranjan & Co., or Sivasambu Candesamy Niranjan, will not accept any responsibility whatsoever if you make any loss as a result of relying on this article.