With the personal allowance frozen at £12,570 yet again this tax year, another 650,000 pensioners will have to pay basic rate income tax, who didn’t before.
Any earnings from self-employment or a part-time job will be added to your state pension and other income, to assess whether you must pay tax.
HMRC is cracking down on seven million Britons, a growing number of whom are pensioners, who do side hustles such as trading secondhand goods online, doing odd jobs, or even making a little money from hobbies and crafts.
From January, digital marketplaces such as eBay, Airbnb, Vinted, Uber and Etsy must report how much users earn, which HMRC will check against its own records to make sure sellers are correctly reporting income.
This effort is part of a broader crackdown on tax avoidance, especially in the fast-growing digital economy.
Under the trading allowance, everybody can earn up to £1,000 a year from a side hustle free of tax, and another £1,000 from renting out property or part of their home. The rent-a-room allows up to £7,500 tax-free income from a lodger.
Now Liam Quirk, chief executive of Quirky Digital, is warning that HMRC is sending out thousands of “brown letters” warning people to comply.
Quirk said failure could trigger fines of up to 100 per cent of the tax owed. “No matter where your earnings come from, it is crucial for you to declare all sources of income on your self-assessment tax return.”
