HMRC issues warning over believing tax 'myth' which will land you a fine

HMRC has clarified a tax myth which is leaving people at risk of a £100 fine. HMRC has busted a myth on Twitter, now X, ahead of the January 31 self-assessment deadline, stating: "MYTH. HMRC hasn't been in touch so I do not need to file a tax return."

The government tax department warned: "Reality: You might." Fiona Fernie, a partner at Blick Rothenberg accountancy firm, stated: "HMRC will compare the reports they receive with their self-assessment records to determine if online sellers have paid the correct amount of tax on the income or gains received.

"A failure to register (for self-assessment) can result in penalties of between 20 per cent and 70 per cent of the tax due where HMRC judges the behaviour to have been 'deliberate but not concealed' plus significant interest charges where tax is paid late."

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John Hood, a tax dispute resolution specialist for Moore Kingston Smith accountancy firm, said: "HMRC has striven to make clear that it is not interested in people selling unwanted Christmas gifts but in professional online traders who have not reported their profits.

"There are some basic tests to check if this is a hobby or a trade with the most important one being whether the person is selling goods or services with a view to making a profit." He added: "People should remember that it is not too late to register for self-assessment."

Andy Wood, an adviser at Tax Natives, an advisory firm, said: "The £1,700 or 30-item threshold is simply the point where platforms report your sales data to HMRC. It doesn’t automatically mean you owe tax or need to fill out a tax return, but it’s a great reminder to check if what you’re doing counts as taxable income."

Dawn Register, a tax dispute resolution partner at accountancy firm BDO, warned there has been "a great deal of confusion around when and how people need to pay tax on extra income or gains earned through side hustles such as selling goods online or earning money through social media content".