Tax experts have warned that anyone renting property through Airbnb or selling goods on sites like eBay and Gumtree could be fined by HMRC if they don't pay income tax on their earnings.
FreeAgent, the online accounting software provider, has warned that many people across the UK don't realise that they should be paying income tax on money they earn "on the side".
FreeAgent is urging anyone who rents property on websites like Airbnb or regularly sells items online to check whether they meet HMRC's "badges of trade" and, therefore, need to pay tax on this income.
- Whether you aim to make a profit;
- If you are involved in "systematic and repeated" transactions;
- If you only have the items in order to convert them into cash, ie they are not your old belongings;
- Whether you already run a business that sells similar items;
- If you have altered the items to make them easier to sell;
- If you make the sale on sites typically used by traders;
- Where the money came from to buy the item;
- How much time passed between buying and selling the item;
- How you acquired the item.
"It's important to remember that it's not just people who run their own established business who need to submit a tax return," said Ed Molyneux, ceo and co-founder of FreeAgent. "With the rise of the sharing economy and the increase in the number of 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."
It is estimated that the average Airbnb host makes at least £3,000 per year, with 50,000 people currently hosting in the UK.
"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," added Molyneux. "By reviewing any 'on the side' cash you accumulate against HMRC's badges of trade, you'll 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."