What if I’m making money online in other ways?
The cost-of-living crisis has seen an explosion of suggestions as to how to make some extra money online to help make ends meet. But the tax consequences often get little or no mention! You must be on top of your taxes from the start so that you don’t accidentally miss an important deadline or make a mistake.
There are many ways to boost your income. But whether it is signing up as a delivery driver, completing surveys on the internet or becoming a YouTuber, there are important tax considerations to be aware of. Our guidance can help you steer clear of any pitfalls with your taxes.
Starting a side hustle
This could include:
- Becoming a delivery rider or driver.
- Offering casual services locally – whether ironing, sewing, cake baking, flower arranging, dog walking or babysitting.
Freelancing – can you do marketing/writing/translating/tutoring? There are plenty of ways to share your skills these days, particularly via online platforms.
Our main Tax if you work in the gig economy page covers the main things you need to know whether you are doing this type of work as your main activity or fitting it in around other work.
There are lots of ways to make money from your social media presence, including by creating YouTube videos or starting a blog/becoming an online influencer.
If you earn less than £1,000 (before any expenses are deducted) from this type of activity, then the trading and miscellaneous income allowance means you might not need to report it to HMRC or pay tax on it, depending on your other circumstances.
If you earn more than £1,000 (before any expenses are deducted) from this type of activity, then you may be able to use the trading and miscellaneous income allowance instead of deducting your business expenses. However, you will still need to report your income to HMRC:
- If what you are doing is like running a business (you are trading), you should register for Self Assessment and complete a tax return to declare your income and expenses like any other self-employed individual. This is the case even if it doesn’t really feel like work and even if you only do it part time!
If it is more of a hobby, then any profit you make will still be taxable but as ‘miscellaneous’ income instead of self-employed income. In this case you still need to tell HMRC about the income. However, HMRC may be able to collect any tax owed on it by adjusting your PAYE tax code instead. You may have a PAYE tax code if you have a job at the same time as doing your social media work. If HMRC can’t adjust your PAYE code, then you will need to complete a tax return to declare your miscellaneous income and expenses. Read more about miscellaneous income.
The line between a hobby and a business is blurred. If what you do is not regular and organised and you don’t have a strategy to make money from your social media presence, then it is possibly more of a hobby. This is something we will developing more guidance on shortly.
If you have a successful social media presence you might receive gifts or payments in kind for promotion, as well as or instead of cash. This can be anything from a new mobile phone to endorse or a pair of shoes to review. If it’s a payment in kind or gift in exchange for promotion (even if you receive it out of the blue), it’s probably considered a taxable amount and you should include the value in your figures when you are working out your income. The value will usually be the amount of money you could sell it for.
The expenses rules for this type of activity can be quite complex, although in reality few social media stars will have significant expenses other than maybe some IT equipment. We are developing some specific guidance for this area which we will post on our website in due course. In the meantime, keep good records of all of the things you spend money on in case you can offset the expense against the income to reduce the amount you pay tax on.
If you are selling things – whether on eBay or a local online platform (or even in a car boot sale or other offline marketplaces) – in most cases there won’t be any tax consequences to worry about. This also applies if you are recycling old mobile phones/laptops/other unused devices etc. through trade-in sites.
The key consideration is whether you 1) regularly sell things you have bought or made specifically to sell on, or 2) whether you occasionally sell things you do not need any more or because you want to clear some space.
If your activity falls under point 1, then HMRC will consider that you are trading and you should complete a tax return like any other self-employed (unless your gross income (before expenses) is less than the trading and miscellaneous income allowance of £1,000.)
This might apply to those selling vintage clothes or arts and crafts for example. Those running their business from home may be able to claim a tax deduction for an appropriate proportion of home related expenses such as heating, lighting, power, maintenance, cleaning and council tax or use the flat rate simplified expenses (there is more information on our page What business expenses are allowable?).
Even if your online selling does not amount to trading (so falls under point 2 above), you may be subject to capital gains tax. Many sales of personal items will be exempt from capital gains tax, but some items (for example, antiques, jewellery and paintings) sold for more than £6,000 could result in a charge. There is a basic guide to capital gains tax on our website.
Renting out things that you own
- Renting out a room in your home: If you take in a lodger, the income you make may be covered by the Rent a Room exemption.
- Renting out your parking space or other land or property: you may be able to benefit from the property allowance and not pay tax or report anything at all to HMRC – see our guidance.
Renting out other things that you own, for example power tools or garden equipment: the trading allowance can cover miscellaneous income received from renting out personal equipment.
Making money online
- Answering surveys or testing products for research companies. You can earn cash, vouchers and rewards for giving honest feedback.
- Watching videos or playing games – some companies pay people to watch adverts and videos hoping they will go viral or that the viewer will engage with other content.
Other ‘click’ work – you can get paid on a weekly or monthly basis for doing other types of online work in your spare time.
This type of activity is unlikely to amount to ‘trading’ and so wouldn’t be classed as self-employment income. However, it may be taxable miscellaneous income. As the amounts you can make tend to be quite small, the income may be covered by the trading allowance. There is information at What is the trading allowance? which includes examples of the position if you have more than one source of trading, casual or miscellaneous income.
Cashbacks when shopping: usually these are seen as a discount on the goods/services purchased rather than an income. So they shouldn’t be taxable unless they meet the criteria to be an annual payment (which can be applicable even if paid more than annually!).
Cryptocurrencies – our dedicated page covers the tax consequences whether you make or lose money.
Remember, you can also earn extra cash by taking a second job - our Having more than one job factsheet tells you everything you need to know about taking a second or subsequent job, from a tax, National Insurance and benefits perspective.
Earning extra money from any of the activities listed on this page might affect any benefits you receive. If you receive any means-tested benefits or benefits that can be affected by earnings, you should contact the relevant government department or your local authority. They will be able to tell you how it affects your benefits.