UK residents making a regular income through platforms like Airbnb and eBay have been urged to consider whether they are required to submit self-assessment tax returns to HMRC, or else risk instant financial penalties.
It was recently predicted that the typical Airbnb host in Britain earns around £3, 000 per year through the platform, hosting for an average 36 nights. Since summer 2016, the UK’s community of Airbnb user has increased by 80 per cent.
Now, accounting software provider FreeAgent has warned that Airbnb hosts as well as those using platforms like eBay and Gumtree to regularly sell goods could face a run-in with HMRC if they do not declare their income via self-assessment.
Ifpeople are considered to be earning a regular income through the sharing economy or an on the side? business meeting HMRC’s badges of trade? qualifications and do not register for self-assessment as soon as possible, they could face an instant 100 fine and risk further penalties for outstanding tax payments.
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In the previous tax year, 840, 000 people 14 per cent of all UK tax payers failed to submit their self-assessment return before the deadline on January 31 2017. The deadline falls on the same day in 2018, and those running a side business have been urged to register with HMRC as soon as possible.
Commenting on the rise of such side businesses, Ed Molyneux, FreeAgent co-founder and CEO, said: it’s important to remember that it’s not just people who run their own established business who need to submit a tax return.
with the rise of the sharing economy and the increase in the number people making regular sales on sites like eBay and Gumtree – as well as renting out property on Airbnb – many people are making money outwith their usual work, ” Molyneux explained.
therefore, HMRC looks at a range of factors to determine whether a person is trading? or not and whether they need to pay tax on that income.
HMRC has recently updated its nine badges of trade? guidelines, outlining when it defines something as a business income.
Aiming to make a profit
Regular transactions that suggest a trade?
The nature of what you are selling
Existence of a similar trade
Changing an item, i.e repairing a car for sale at a profit
How the sale was made, i.e. Amazon more likely to be used for business than eBay
Where the money came from to buy the item, i.e. borrowing money would indicate a trade
How quickly the item was sold after buying
How you acquired the item, i.e. inherited goods from a family member would not indicate a trade
Molyneux added: Many people in the UK may be currently unaware that they actually have to file a self-assessment tax return, so it’s vital that everyone checks whether the money they make is taxable income or not.
“By reviewing any on the side? cash you accumulate against HMRC’s badges of trade, youll be able to tell whether you need to register for self-assessment and file a tax return – and avoid any nasty surprises from the taxman in the future.
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