Research and analysis

Qualitative research exploring the impact of income tax reporting and payment within the Online Sharing and Gig Economy

Published 24 July 2025

Prepared by Kantar for HM Revenue and Customs. The views in this report are the authors’ own and do not necessarily reflect those of HM Revenue and Customs

HMRC Research Report: 834

This report was commissioned under the Conservative administration (2010 to 2024), and fieldwork was conducted from September to October 2019.

1. Glossary of terms

Definitions of terms used throughout the report can be found below.

There are no single agreed definitions of the Gig Economy or Sharing Economy. The definitions used in this research were designed to pull out the intricacies of the experience of the two different ways of generating income.  

Sharing Economy

Economic activity, facilitated by the internet through online ‘matching’ platforms, where people or businesses share, sell, or rent out tangible assets, such as property, that they do not otherwise fully utilise.

Gig Economy

Economic activity centred around the exchange of services, skills or labour through short-term or on-demand ‘gigs’, facilitated by online platforms which ‘match’ suppliers to customers.

Deduction at source

A process by which income tax is withheld or deducted from the income owed to a recipient by a principal, who then pays this tax to the Government directly alongside a report of the income and deduction, thus removing the onus on the recipient to administer the payment of this tax. PAYE, for example, is the most prevalent deduction at source regime.

Pay As You Earn (PAYE)

A method of paying income tax and National Insurance contributions. The employer deducts tax and National Insurance contributions from the employee’s wages or occupational pension before paying wages or pension payment of the net amount to the employee.

Self Assessment (SA)

Self Assessment is a system HMRC uses to collect Income Tax. Tax is usually deducted automatically from wages (for employees), pensions and savings. People and businesses with other income not taxed at source must report it in a Self Assessment tax return.

2. Executive summary

In July 2019, HMRC commissioned Kantar (Public Division) to carry out research to explore the potential impact of deduction at source on the online Sharing Economy and Gig Economy. Fieldwork was conducted in September and October 2019. The overarching aims were to build an in-depth understanding of current payment and tax arrangements for online platform users, to uncover the complexities of this form of working, and how this might impact a possible extension of deduction at source to income earned through online platforms. Findings from this research are intended to support the development of schemes to simplify tax reporting and collection.

A qualitative in-depth study was conducted with 49 individuals, using a combination of face-to-face and telephone interviews. Research participants were split between those generating income thorough ‘Gig Economy’ platforms and those through ‘Sharing Economy’ platforms, and included a range of skills, assets and demographics.

3. Key findings

The following key findings relate to the research objectives ^{[footnote 1]}.

Explore and provide insight into the current behaviours, attitudes and practices of platform users in the Sharing Economy and Gig Economy

Platform users across the Sharing Economy and Gig Economy were united by their need for autonomy of how and when they work, and for income. Gig Economy platform users had relatively complex experiences, with greater variation in platform types and skills, motivations, and ways of working. Sharing Economy platform users’ experiences were relatively straightforward, being primarily focused on additional income generation with minimal effort. This type of income generation was seen as particularly easy to manage around other commitments, such as full-time work.

Platform users also managed tax in different ways, based on differing levels of awareness of their tax obligations and their attitudes towards tax compliance. The following groups emerged through the research across both Sharing and Gig Economy platform users:

• ‘holistic approach’ platform users tended to incorporate income generated from online platforms into their overall financial calculations and tax payments. They tended to indicate that they were compliant and had high awareness of their tax obligations
• ‘perceived exempt’ platform users had some awareness of their tax obligations, with some users indicating that they were compliant and others indicating that they were non-compliant. They believed that their level of income meant they were exempt, although in some cases this was based on low awareness of the taxable threshold
• ‘disengaged’ platform users indicated they were non-compliant, but fell into two categories:
• those with limited awareness of their tax obligations, who were also not seeking information about their tax obligations because they were trying to hide from or ignore their current situation;
• those who had comparatively higher knowledge of their tax obligations but were actively avoiding the perceived ‘hassle’ of paying tax.

Sources of tax support were predominantly accountants, friends or family and the HMRC website. Platform users received minimal guidance from the online platforms. Those who felt they were currently managing their tax well were generally more experienced in paying tax, and many of those who felt they were managing their tax well made use of accountants.

Grouping platform users according to their understanding of and behaviour towards tax (as above) highlights the different needs of platform users when engaging with tax. For example, platform users in the ‘perceived exempt’ and ‘disengaged’ groups need greater encouragement to engage in the tax process than the ‘holistic approach’ group. Providing information tailored to their circumstances and behavioural traits is likely to make engaging with the tax process more accessible. This is particularly important as accountancy services are not available to all.

Explore how platform users in the Sharing Economy and the Gig Economy are likely to respond in both mandated and voluntary deduction at source scenarios

All platform users were generally unsure how such a scenario might work in practice and found it quite conceptual. They needed to be reassured of the practicalities, particularly the logistics of how HMRC would ensure they were paying the right tax across multiple sources of income.

Beyond this, participants broadly fell into three groups in terms of their reaction to the concept of deduction at source.

Accepting/positive

Platform users who found the concept of deduction at source appealing felt it would mean they wouldn’t have to engage with tax, which for this group was something they had little or no prior exposure or knowledge about. They were keen to reduce stress and saw deduction at source as a way of removing the burden and worry about doing the wrong thing.

The accepting/positive reaction tended to come from those in the ‘perceived exempt’ and the ‘disengaged’ groups, as they preferred to exert little effort towards both understanding and managing their tax.

Ambivalent

Similar to those who were accepting/positive of the concept, platform users who were unsure about deduction at source understood HMRC’s motivation to ensure tax is paid on income generated through online platforms.

However, they were more sceptical about how it would be applied and worried that it could disrupt their current way of managing tax. This ambivalent reaction tended to come from platform users in the ‘holistic approach’ group as they were more confident in managing their tax and incorporating the income from online platforms into their overall financial calculations. They preferred to maintain control over their tax (whether using an accountant or doing it themselves).

Additionally, some platform users in the ‘perceived exempt’ group were ambivalent as they were unsure of the logistics of deduction at source and felt it had the potential to become too complicated and disruptive.

Dismissive

Platform users who were dismissive of the concept of deduction at source were generally concerned about a loss of autonomy and felt that relying on the platforms or HMRC could potentially lead to error and be disruptive to their level of earning.

Platform users who were dismissive were generally those who earnt all or a significant proportion of their income from one or two platforms. Dismissive reactions tended to come from those in the ‘disengaged and avoiding’ group. These platform users wanted to maintain control over their finances, which included, in some cases, continuing to not pay tax.

However, some in the ‘holistic approach’ group were also dismissive as they wanted to maintain control over their finances. They did not see themselves as the target group for deduction at source because they were already managing their tax well.

Understand how online platform users would react to the changes deduction at source would bring and why (including direct and indirect impacts)

The reactions of platform users to deduction at source depended on how they used the platform and their level of reliance on the income it generated.

For example, those in the Sharing Economy tended to be more sensitive to changes that would complicate their engagement with the platform, which was currently fairly simple. Similarly, low earning Gig Economy platform users were sensitive to anything that might affect their income.

Established self-employed platform users were sensitive to anything that might undermine their control over their finances or result in them having to spend more time updating or correcting the information HMRC holds on them.

While most participants felt that deduction at source was unlikely to impact their current behaviour, they felt they would need to reassess this position once deduction at source had been implemented. If the administrative costs were high, or they found themselves paying more tax, or competing against other platform users not paying tax, platform users reported they would keep their earnings under the tax threshold, or stop using platforms and revert to other ways of generating income, or shift to less regulated platforms.

These attitudes existed across Gig Economy and Sharing Economy platform users, although the decision making process was driven by their need for income. Those who were using their platform income as their main source of income were less likely to leave the platform than those who were using it as a supplementary form of income.

More broadly, platform users identified indirect impacts of deduction at source, including increased prices (in terms of the platforms incorporating the cost of managing withholding into the overall fees for platform users) and perceived unequal competition with international platform users.

Uncover what might incentivise early take-up of deduction at source and what the key barriers to take up might be for platform users

The platform users most incentivised to take up deduction at source were those who were engaging with tax but had little knowledge (the ‘perceived exempt’ group and those in the ‘disengaged’ group who were avoiding thinking about tax). They saw it as simplifying the process and reducing errors, therefore giving them confidence that they were doing the right thing.

Some platform users had concerns about deduction at source inadvertently leading to the creation of a longer and more complex payment process. They felt that this might lead to errors and create more of an admin burden for them. This particularly applied to platform users in the Gig Economy who were confident in their current management of tax and were concerned about losing the control, autonomy and oversight they had.

In order to feel more positive about deduction at source, whether mandated or voluntary, all platform users wanted a transparent process and accessible communications about the logistics of implementation (including what deduction at source would look like, how it would be calculated and by who, and what would be required of them or their platform) and how much tax they could expect to be deducted. They wanted to understand how this would be tailored to their circumstances, particularly if their earnings fluctuated over time or they received income from multiple sources. Finally, they needed reassurance and clarity on how deduction at source would be managed, in order to have confidence in both the platform and HMRC to manage the process correctly.

Platform users who were either fully engaged in their own tax ( the ‘holistic approach’ group and some in the ‘perceived exempt’ group) or not currently paying tax (both ‘disengaged’ groups and some in the ‘perceived exempt’ group) were likely to only accept deduction at source in a mandated scenario, regardless of whether they operated in the Gig or Sharing Economy. Concerns were raised about creating an uneven playing field if deduction at source was not mandatory and only some individuals or platforms signed up to it.

As a result, it will be important that any implementation of deduction at source is explained clearly, with individual examples. Implementation will need to feel fair and consistent across different platform users.

4. Context and methodology

4.1 Research context

Technology is driving changes to traditional patterns of work: the Gig Economy and Sharing Economy are examples of this. The availability of online platforms, through which individuals can provide labour or services, presents a range of opportunities for new ways of working and generating income. However, it also raises questions about how best to simplify tax reporting and collection for platform users in these economies. The nature of platform-based working involves a range of complexities, including but not limited to: individuals operating across multiple platforms; splitting income and payments between online and offline channels; unstructured or sporadic engagement with online platforms and variable payment processes; and sensitivities regarding the nature of the relationship between these platforms and their users.

In light of the changing labour market and rise in innovative forms of working, including platform-based working, the Taylor Review of Modern Working Practices (2017) ^{[footnote 2]} identified the need for greater transparency of payments and mechanisms for declaring tax. In response, the government announced an ambition to work with online platforms to explore opportunities to promote better tax compliance by their users ^{[footnote 3]}.

In 2018, the government ran a broad call for evidence on the role of online platforms in ensuring tax compliance by their users ^{[footnote 4]}. In response to concerns from respondents that tax can feel complicated for many online platform users, HMRC began work to improve the income tax help and support available on GOV.uk. In addition, HMRC are continuing to explore methods to simplify tax reporting and collection, including collecting tax at the earliest point in the payment chain through the greater use of deduction at source.

4.2 Research objectives

Kantar (Public Division) was commissioned in July 2019 to explore current behaviours and needs of people that use online platforms to generate income, with the following objectives:

• explore and provide insight into the current behaviours, attitudes and practices of platform users in the Sharing Economy and the Gig Economy;
• explore how platform users in the Sharing Economy and the Gig Economy are likely to respond in both mandated and voluntary deduction at source scenarios;
• understand how online platform users would react to the changes deduction at source would bring and why;
• explore the direct and indirect impacts of deduction at source on platform users;
• uncover what might incentivise early take-up of deduction at source and what the key barriers to take up might be for platform users.

These research objectives have been adapted slightly since this research was commissioned. The research originally sought to include interviews with platform business representatives. However, due to difficulties recruiting this population, this report focuses solely on the views and experiences of platform users.

4.3 Methodology

A qualitative in-depth study was conducted with 49 participants, recruited from across the UK. Fieldwork was conducted in September and October 2019. Research participants were split based on whether they were Gig Economy or Sharing Economy platform users and included a range of skills and assets.

The sample only included platform users who were providing labour or services, or sharing tangible assets, through online platforms. The online platforms in scope for this research were those that directly facilitated payment transactions to their users. Online marketplaces, platforms that only advertised the work or assets available, and community sharing platforms were out of scope.

To capture both a range and diversity of views, the sample included a mix of ages, genders and geographical locations. Extension of deduction at source would apply irrespective of location, so it was important to recruit a sample with a geographic spread across the UK. Key sample criteria are outlined in the sample table in the appendix.

The sample was broad, in order to capture the range of online platform users’ backgrounds and experiences. Although there may be differences between platform users related to specific characteristics, such as income level, the sample was not designed to focus on these differences specifically. Whilst the report highlights where clear differences between groups of platform users were observed, other differences between groups of platform users may exist but have not been captured in this research.

Interpretation and representation of qualitative data

Qualitative research enables discussion about complex, sensitive and contentious topics. It does not aim or allow for statistical analyses. This means that the data presented in this report is neither representative nor generalisable and is not meant to be used to provide statistically significant results. The findings are one way to further understand the behaviours, attitudes and practices of online platform users in the Sharing Economy and Gig Economy, and their perceptions of deduction at source. The findings cannot be taken to be indicative of all platform users.

Case studies and quotes have been used throughout the report to illustrate the findings. They are not intended to be representative and have been anonymised (with names and identifying characteristics removed).

5. About Gig Economy and Sharing Economy platform users

5.1 Overview

Gig Economy and Sharing Economy platform users shared common motivations for initially pursuing and continuing to use online platforms. Autonomy over how and when they were able to generate an income, whether primary or supplementary, was a key motivator for platform users to start using platforms. These factors also determined whether they were likely to continue using the platforms to generate income, both in general and in a hypothetical scenario in which deduction at source was implemented.

The reality of what ‘autonomy’ looked like varied among participants. For some, autonomy meant having more control over working life, using their skills to change careers or transition to different ways of working, or the ability to gain access to specific industries or networks in their own time and at their own pace. Additionally, autonomy was about having control over how their income was generated. Participants were motivated to use platforms to generate income if they felt it would improve their work-life balance. For example, fitting work around other priorities, such as caring commitments or health conditions.

The opportunity to generate income, whether as a main source of income or supplementary income, was a key motivator for starting and continuing to use online platforms. For most platform users, particularly those in the Sharing Economy, this was a supplementary source of income. This income stream was seen as either helping to cover general living expenses or to build savings, whether for a specific purpose, such as a holiday, car or home, or for more general savings. Only a small subset of platform users, across the Sharing Economy and Gig Economy, were using online platforms as their main source of income. Case studies shown below include a full-time driver and a full-time dog sitter in the Gig Economy.

About Sharing Economy platform users

Overall, the experience of online platform users operating in the Sharing Economy was relatively straightforward (compared to those in the Gig Economy). This is likely to be the result of having a limited range of assets that could be rented (entire homes, spare rooms in their homes or a car parking space). Furthermore, there were typically fewer options of platforms to choose from or that participants were aware of, compared to the Gig Economy. As such, their motivations and work patterns were often relatively straightforward: they typically wanted to be able to generate supplementary income with minimal effort.

Most of the effort involved in generating income within the Sharing Economy came during the initial setup on the platform. This involved building a profile, getting verified and determining their price. Once set up was complete, the time required to manage renting their asset was minimal. However, in some cases, if participants had more time or wanted to reduce the cost of managing their rentals, they had undertaken their own maintenance and cleaning, and spent more of their own time working to maintain their rental asset to generate income through the online platform.

A key difference between platform users in the Sharing Economy and the Gig Economy was that more participants in the Sharing Economy were in retirement or partial retirement. Several of these participants saw online platforms in the Sharing Economy as an opportunity to generate supplementary income, whilst also making use of a property that they were using less because their children were living elsewhere.

The case studies outlined on the next three pages highlight key features of typical types of Sharing Economy platform users. One platform user generates income by renting property in a flexible way around their caring responsibilities. Another platform user rents part or all of his property on a part-time basis to offset travel expenses and to put money towards the mortgage. Another platform user rents her parking space to make extra income. While the types of assets are different, the key feature for these platform users is being able to make use of an asset to generate supplementary income with minimal effort.

Sharing Economy Case Study: Accommodation Rental

Background

Lucy is 45 and works part-time managing and marketing holiday lets through online platforms. She lives with her husband and three children in South East England. Her current income level is £11,500 to £30,000.

Need for autonomy

Lucy used to work full-time hours but transitioned to working part-time when she and her husband started having children. Lucy previously took bookings for the holiday lets over the phone, but now uses online platforms to market and manage the rentals. Although Lucy uses multiple platforms, she tends to get most of her bookings through one platform.

About 90 to 95% of her income is generated through the online platforms, whilst the other 5 to 10% comes from renting the holiday homes to friends and family who pay her directly, rather than through the online platforms.

Her main motivation for starting to use online platforms was to work less hours in a more flexible way. The online platforms give Lucy greater control over her schedule, enabling her to fit her work around her children’s schedules and other family priorities.

Although the amount of hours can vary week by week, depending on the time of year, Lucy is able to plan in advance for this because she knows that certain times of the year, such as summer time, will be busy for her.

Primary source of income

Lucy reports that the income from online platforms is at least 90% of her overall income. She feels able to make an income without working long hours, she reports working only 5 to 10 hours per week because the online platforms require little effort.

Some days I could spend an hour on it, some days 3 hours, some days nothing at all, depending on what the kids are doing, if we’re away… There’s no set pattern to when or how much I work. It depends on what needs doing.

Sharing Economy Case Study: Accommodation Rental

Background

Michael is 35 and works full-time as a project consultant. He lives in London with his wife. They have been using an online platform for several years to occasionally rent their property as and when it works with their own travel and work schedules. His current income level is £30,000 to 50,000, which includes the income generated on the online platform.

Need for autonomy

Michael’s main motivation for starting and continuing to use the online platform is because it enables him and his wife to rent out their home when they choose. He likes that they can fit it around their own travel schedules, and they can strategically rent it out during the most profitable times, while taking a holiday themselves. He feels they have complete control over their calendar, the amount of hours they spend managing bookings, and they can easily manage the rental using an app on their mobile phones at their convenience

Supplementary source of income

Michael views this as a supplementary source of income that allows him and his wife to take more holidays and put money towards their mortgage. Aside from the set-up in the beginning, the online platform requires minimal effort to generate extra income.

We try to offset the costs associated with accommodation, flights and travel. Pretty much any time we’d be away for any reason we’d put it on the market.

Sharing Economy Case Study: Parking Space Rental

Background

Valerie is 25. She lives with her husband and works full-time as a nurse near Manchester. She is new to using an online platform to generate income. Her current income level is £11,500 to 30,000, which includes the income she makes on the online platform.

Need for autonomy

For Valerie, the key benefit of using the online platform is being able to rent her car parking space as and when she chooses, with minimal effort and no long-term commitment. She mainly rents it out during times when she can earn the most money, such as during events in the city. She likes that there is no commitment to it and she can decide to stop whenever she chooses, or if she decides she is not making enough income.

Supplementary source of income

Valerie wants to continue using the online platform to top up her income. She does not expect to make a substantial amount of money using the online platform. She saw an opportunity to make use of an asset, her parking space, to generate extra income with minimal effort.

I wanted minimal input to earn extra money.

About Gig Economy platform users

Platform users operating in the Gig Economy emerged as a distinct and separate group from the Sharing Economy platform users, despite sharing similar lifestyles, motivations and work patterns. This is perhaps due to the type of skills and services available in the Gig Economy, which were more varied and less straightforward than purely renting a tangible asset. Gig Economy platform users were using the platforms to generate income from a wider range of skillsets and services, such as driving, tutoring, editing and recruitment. Additionally, among these platform users, there tended to be more students and professionals using the platforms to try out working for themselves or to transition to a different sector or way of working. There were also fewer retired or semi-retired people using platforms in the Gig Economy.

The case studies outlined below highlight the key features of typical types of Gig Economy platform users. One platform user, a driver, uses his platform full-time to have greater autonomy over his working life. Another platform user is a tutor, using the platform part-time in an attempt to set up her own business and have more control over her work-life balance. The third case study illustrates a less common platform user: a dog sitter who uses the platform full-time, supplementing his income with Universal Credit until he can generate a higher income through the platform. While the work patterns vary, a key feature for most online platform users in the Gig Economy is having the flexibility to fit platform use around other life priorities.

Gig Economy Case Study: Delivery Driver

Background

Ian is 36 and works as a delivery driver in Northern Ireland. He is divorced and has shared parental responsibility for two young children. Within the last year, he transitioned from being an employee to using an online platform full-time to generate income. His current level of income falls between £11,500 and £30,000, all of which has been generated from an online platform in the last 12 months.

Need for autonomy

His main motivation for transitioning to using the online platform full-time was because he wanted greater control over the delivery jobs he accepts, and the hours that he works. He prefers being able to create his own work schedule because it allows him to fit it around his childcare commitments. He also enjoys having no one to report to and that he doesn’t feel like an employee.

Primary source of income

The critical difference for Ian is that he has fewer expenses and he is able to earn more hourly as a delivery driver for an online platform, compared to when he was an employee.

[The platform] gave me a new way of being a driver, and a much more attractive way to be one, with more flexibility, no rent to pay and overall a much better work, family and life balance. I now work 40 hours a week instead of 80 hours.

 

Gig Economy Case Study: Tutor

Background

Sarah is 30 and lives in an urban area on her own. She works part-time as a primary school teacher and as a tutor. She does face to face tutoring as well as via an online platform. Her current income is £11,500 to £30,000, including the income she generates through the online platform.

Need for autonomy

Sarah’s main motivation for generating additional income from an online platform is that it enables her to teach pupils without the additional admin burden that comes with teaching in a school. She also enjoys the casual nature of the work. Additionally, she would like to have more autonomy over her work life by setting up her own business. She is using the online platform as a way to gain experience working for herself.

Supplementary source of income

At present, Sarah’s main source of income comes from being a part-time primary school teacher. She is not reliant on the income that she generates from online platforms and views it as a ‘top-up’ to her main income. She is working towards using online platforms as a stepping stone towards building her own business.

I’ve been teaching for a while, it’s a stressful job. I’m looking to run my own business rather than it being a side thing. I don’t need that money, it’s just a security blanket for when I do make that move in a couple of years.

Gig Economy Case Study: Dog-sitter

Background

Gary is 40 and lives on his own in London. He recently transitioned to working full-time as a dog sitter through an online platform. He was initially using several platforms but decided to use only one that he preferred and received the most bookings on. Previously he worked full-time in social care. However, due to mental and physical health issues, he decided to leave the profession to try out working full-time as a dog sitter through an online platform. In the last year, he has earned an income of just over £11,500.

Need for autonomy

Gary chose to use an online platform to generate an income because he wanted more control over how many hours he worked and what he did. While the hours that he works need to be in line with demand, he has control over which bookings he chooses to accept during periods of high demand. Gary appreciates this type of work because he finds it less stressful and it allows him to prioritise his mental and physical health.  

Primary source of income plus Universal Credit

Gary views his Gig Economy work as an independent way to generate income. He has only recently started using online platforms full-time to generate income but plans to continue building a client base in order to earn more income through this type of work. In the meantime, he receives Universal Credit to supplement his income.

I earn more from [Platform A] because there’s more work available, so you can always manage to get something. [Platform B] is quieter, and only a few people will be using it.

                                                                                                                                                                              

Amongst all platform users operating in the Gig Economy and Sharing Economy, only a small subset worked across multiple platforms, with a maximum of two to three platforms involved. They tended to use one primarily if it was easier to use, if they had more bookings on it, or when it became too difficult to coordinate across multiple platforms.  

6. Experiences with the platform payment process

Most platform users reported a good experience of platform payment processes. A positive payment experience was defined as being easy to set up, with the platform providing clear information on when and how platform users would be paid and providing access to their transaction history. This information provided platform users with clarity on what they would be paid over time and gave them reassurance that they had a paper trail if necessary (such as if they needed to provide evidence to HMRC). This was important to platform users in both the Gig and Sharing Economies.

I’ve always been paid on time, I’ve always been paid the correct amount, that’s not a problem.

Gig Economy user, tutor, South East England

As stated above, platform users generally experienced the process of being paid as easy and straightforward, particularly those in the Sharing Economy. There were more varied experiences among platform users in the Gig Economy, although this potentially reflects the wider range of platforms used by the participants interviewed.

Fair payment processes

Payments were typically seen as fair, with what was viewed as a reasonable fee deducted by the platform. For example, one participant who was using an online platform to rent their property described a positive payment experience as involving little effort on their part, payments arriving when expected within a couple of days, and fees that were perceived to be fair and consistent. Positive payment experiences encouraged platform users to trust the platforms to manage payments correctly and treat them fairly. There were a limited number of platform users who had to claim expenses from the platform (for example, for damage to their property). However, those that did found this process to be quick and straightforward.

The platform does everything and that’s why I like it. There is no cash involved. The guests pay the platform and the platform pays the host.

Sharing Economy user, accommodation rental, South West England

I like getting paid after each guest, it’s easier to track… [the platform] were very good and supportive when my flat got trashed. I went onto the app, raised an issue and sent through photos of the damage. I corresponded via a chatbot which was very quick and efficient, and I was paid back for the damages within a week.

Sharing Economy user, accommodation rental, Northern Ireland

Impact of complicated or inconsistent payment processes

While good payment processes can build trust and make platform users feel in control, complicated or inconsistent payment processes can undermine trust. While most experiences were positive, bad payment experiences were cited where platform users were unclear on when they would receive their money, and the exact amount they could expect. This was particularly noticed by platform users in the Gig Economy who were using multiple platforms to compare their experience on each. A good payment process encouraged greater use of the platform by these users. Lack of transparency around fees and payment timings led to budgeting difficulties and undermined their trust in the platform. Poor payment experiences were also cited as reasons for not trusting platforms to manage deduction at source.

7. Current tax payment process and support

7.1 Four ‘types’ of platform users

Across both Sharing and Gig Economy platform users, four distinct groups emerged in relation to their engagement with tax, including their awareness of tax obligations and attitudes towards tax compliance, in relation to the income generated through online platforms (as outlined in the diagram below).

Splitting out the four distinct groups helps to highlight the variations in what drives current and potential future compliance behaviour.

The next section explains each of the four distinct groups of platform users.

Holistic tax approach (indicated that they were compliant)

Participants in this group tended to have a high awareness of their tax obligations and considered it to be a moral and legal duty to comply. They had a predisposition to pay tax and tended to enlist the support of an accountant to ensure that any income generated from platforms was incorporated into their overall financial calculations and tax payments. This included a combination of income from freelance work/self-employment, assets, and, for some, PAYE work. As a group, they were relatively experienced in managing their own tax and recognised that they had relatively complex tax affairs which they preferred to maintain control over, either by paying someone to do so or doing it themselves. This group’s desire for control and a tendency to see themselves as doing the right thing means they may be less receptive than other groups to alternative arrangements.  

I just did it [reported taxes] myself, it was straightforward. I didn’t feel I needed assistance.

Gig Economy, tutor, Manchester

Perceived exempt (indicated that they were compliant or non-compliant)

Participants in this group were more varied in terms of their level of awareness of their tax obligations. Typically, they had less experience managing their own tax and had made assumptions about their obligations with limited information. They had some awareness of their obligation to pay tax on their platform income. However, they believed they were exempt because the amount generated was minimal and therefore assumed to be under the threshold of taxable income. This group typically had less experience managing their tax, as they were in other full-time employment and their tax was paid through PAYE. This meant that they often saw their platform income as separate from other income streams. In addition,

Overall, this group were cautious about tax, meaning that they were careful to avoid problems caused by managing their tax incorrectly. They recognised a legal and moral obligation to pay tax, but their lack of experience with managing tax themselves or through an accountant meant they were often unsure about what to do. Even where they were confident that they were currently under the threshold of taxable income, they were uncertain about what to do if their platform income increased in the future. For example, several participants within the Sharing Economy in London were confident that they were under the tax threshold because of the ‘Rent a Room Scheme’ in London. This scheme allows property owners to earn up to £7,500 per year, tax free, when letting out furnished accommodation in their home ^{[footnote 5]}.

Because of the student loan, I’m trying to keep myself below the threshold… I know if I have done my expenses wrong there is wriggle room still not to pay tax if I’m audited. I’m purposefully not getting into the area where I could be taxed.

Gig Economy user, driver, North West England

I don’t think it’s a massive amount of money. Everything that I use it for would probably be exemption tax anyway.”  

Sharing Economy user, parking rental, London

It was complicated and frustrating…what kind of employment does this come under and what total of income in what period of time?

Gig Economy user, tutor, North West England

Disengaged – ignoring/hiding (indicated that they were non-compliant)

This group had significantly lower levels of awareness of tax obligations than the ‘perceived exempt’ group. They were disengaged with the process of paying tax, meaning that they were both unaware and had not sought information about their tax obligations. As with the ‘perceived exempt’ group, their previous experience of managing tax had required little personal engagement: for example, paying tax through PAYE or working cash in hand (and not declaring the income).

People in this group reported feeling stressed that they were doing the wrong thing and feared that they might get in trouble for it eventually. However, they were not actively engaging with tax in order to address potential wrong doing. They were disengaged while also being stressed. Most people in this group did not have access to an accountant, either because they did not know how to find one or they were unable to afford one.  Furthermore, people in this group self-reported poor record-keeping which appeared to drive their ongoing disengagement with tax.

[Tax] is something I haven’t thought about really, I’m still pretty new to this game. There is a lot I don’t know, and it may come back to bite me in the end.

Gig Economy user, tutor, London

I have no idea how to do it [pay tax].

Sharing Economy user, parking rental, North West England

Disengaged – actively avoiding (indicated that they were non-compliant)

Participants in this group tended to have higher levels of awareness of their tax obligations than those that were disengaged and ignoring or hiding from their tax obligations. While they understood it as a legal obligation, they were less concerned about the risk of penalties for not paying tax. They also differed from the previous disengaged group because they did not express feeling stressed or fearful of the repercussions. They typically wanted to avoid the additional work and perceived “hassle” of paying tax, particularly when they were earning a lower income or if the income earned from the platforms was relatively low compared to other income streams. This view was held regardless of whether they knew they were above the taxable income threshold or not. This group was likely to continue to avoid paying tax even if they knew they were above the threshold. 

I’m lazy and I dread doing my tax return…once or twice missed the deadline and had to pay a penalty fine.

Sharing Economy user, accommodation rental, Northern Ireland

7.2 Support with tax reporting

Third party support

Those in the ‘holistic approach’ and ‘perceived exempt’ groups, who had already or were intending to pay tax on the income generated from online platforms, tended to seek support from accountants. There was an expectation that an accountant would be able to save them time and money in navigating a system that they were not entirely confident with. Additionally, they wanted to ensure that it was done correctly. This view was reported by a fairly even split of Gig and Sharing Economy platform users across the sample.

Support from an accountant was not an option for all, mainly because of the cost involved. However, even among those who were unable to afford accountancy services, platform users held the view that an accountant was likely to be the best source of support.

The next best source of third-party support was friends or family, particularly those with financial or accountancy experience. A small subset of participants sought advice from a debt advice service or other websites offering simple, non-tailored tax advice.

My friend has an accountant, so we’ve already started to collate the information on the property we’re renting out, like how much earnings we’re getting, and what we’ve spent…I’ll probably be looking to use an accountant to advise me.” 

Sharing Economy user, accommodation rental, London

My accountant tells me what I need to be aware of, so I just listen to her really…I just get sent a questionnaire from my accountant — they complete my Self Assessment for me.

Sharing Economy user, accommodation rental, London

By myself I cannot do it, I don’t have the time and I can pay a professional

Sharing Economy user, accommodation rental, London

HMRC support

In addition to seeking support from family and friends, and tax advice websites, platform users not reliant on an accountant to manage their tax reported that they would go to the HMRC website as a source of information. This seemed to be a logical step for most participants. However, their views on whether the HMRC website would be useful or easy-to-navigate varied. There was an assumption that the website would be complicated and it would be difficult to find what they needed. For some this was from personal experience of finding the website difficult to use. Others initially assumed the website would be difficult to use but were surprised to find that this was not the case once they accessed the website.

However, in general, the HMRC website was typically seen as less straightforward than other tax advice websites.

I find other websites explain better, sometimes the wording (by HMRC) is not very clear and that’s why I used the other website as well just to make sure I understand it correctly.

Sharing Economy user, accommodation rental, London

It’s [HMRC] not as bad as I expected on government pages. It’s quite well-presented, relatively straight-forward.

Sharing Economy user, accommodation rental, London

Platform support

Participants rarely spontaneously mentioned seeking support about tax from their online platforms. When probed about this, they were often unaware of support being available from their platform or they had vague recollections of having received information when they set up their account which mentioned a legal obligation to pay tax in the country of operation. Some platform users also mentioned that their platforms had a section on their website with relevant information, although they had rarely used it. There was an assumption that the platform would not have the correct information about tax in the United Kingdom and was therefore not a reliable source of support.

Overall, participants reported receiving limited support from platforms in respect to paying tax on the income they generated. However, they acknowledged that it would make sense, and could be potentially useful, for the platform to provide more support. This was seen to be the case even if the platform simply provided a link to appropriate sources of support or outlined how platform users’ invoices and transaction histories could be used as an accurate record of their income for tax purposes.

I don’t know if I need to pay tax on the income I’m getting from [platform]. If it’s due, [the platform] never made that clear.”         

Sharing Economy user, accommodation rental, Northern Ireland

It would have been useful to know…if you earn over this amount in the tax year, you need to get in touch with HMRC… I was nervous at first about whether I was doing the right thing.”       

Gig Economy user, virtual assistant, South East England

If the platforms provided a bit of information, just a glimpse of a Self Assessment, that would be helpful, to help you navigate the resources, so it’s easier to get started.”      

Gig Economy user, tasker, Scotland

They probably know nothing about UK tax and I’m a freelancer and my tax has nothing to do with them.

Gig Economy user, tutor, London

8. Views of deduction at source 

When asked about the concept of deduction at source, participants were generally unsure how such a scheme might work in practice. In particular, they felt they needed to know more about the logistics of how HMRC would ensure they were paying the right tax across multiple sources of income. Some participants, across both the Gig and Sharing Economy, spontaneously raised concerns that the amount deducted for tax would be an estimate and that it could lead to being over or under taxed. This would need to be corrected at the end of the year, creating budgeting difficulties or requiring them to spend time querying it with HMRC.

While participants found the idea of deduction at source too conceptual to discuss the impact of implementation in detail, their initial responses ranged from relatively accepting, ambivalent, to dismissive. These three responses are explored in more detail below.

Accepting/positive

Platform users who found the concept of deduction at source appealing felt it would mean they wouldn’t have to engage with tax, which for this group was something they had never had to do. These people were generally PAYE employees who had recently moved to the Gig or Sharing Economy or had been paid cash in hand before (and not declared taxable income). This meant they had little prior exposure to calculating their own tax or generally had trust in the PAYE system that they had more experience with.

Furthermore, they saw that deduction at source could make life easier by reducing stress and worry about doing the wrong thing. They would feel reassured that they were doing the right thing without having to put in effort (similar to PAYE) and wouldn’t receive an unexpected tax bill. However, while they were generally accepting of the concept, they were concerned about how it would be applied in practice. This included concerns about how the scheme would work in complex situations like flexible working, where they would be operating during variable hours or days, have fluctuating income, and be using multiple platforms – all of which, they felt, could lead to a more complex tax code.

That would be better for somebody like me, because obviously in my current job I don’t have to do anything to do with paying tax, so if it was included in the platform process it would be one less hassle that I’d have to worry about, so I think that would be a good thing for me.

Sharing Economy user, parking space rental, North West England

The following quote from a Gig Economy user, introduced in a case study on page 16, highlights the accepting and positive views on deduction at source, primarily as a way to reduce burden. Despite this general positivity, the participant still wanted more information to understand how deduction at source might impact them.

I think it is a fine idea, I thought it was the case anyway. On a personal level you would need to look at the detail at how it would impact you. It would make my life a lot easier and streamline the process.

Gig Economy user, dog sitter, London

Ambivalent

Participants who were sceptical about deduction at source held similar views to the accepting/positive group but were more sceptical about how it would be applied. They had typically been working in the Gig or Sharing Economy for longer or were using multiple platforms. Therefore, they were aware that they might have a more complex tax situation that could require coordinating information across multiple platforms.

If you are working for one platform, I can see people seeing this as a really good idea. It will cut their admin but for someone like me who has got lots of platforms, we need to make sure it is all working properly and we are not having money taken off us when we shouldn’t. All my jobs are minimum wage so I have to be careful and would worry that money would be withheld inaccurately.

Gig Economy user, tutor, North West England

While this group understood and respected the aim of extending deduction at source to online platforms, and could see how it would make life easier (similar to the accepting/positive group), they expressed unease about platforms having their tax information in order to calculate how much to deduct. They felt this information was personal, and could be used to market products to them against their will. Some participants also cited high profile data leaks which had led to identity fraud.

What bothers me is the sharing of my details between the tax office and [platform provider]…those details should be confidential. There’s no guarantee that [platform provider] might not use that information to target me for advertising once they know how much I’m worth.

Sharing Economy user, accommodation rental, London

Those who felt confident about their current tax management approach – whether handled by themselves or an accountant – were slightly more wary of disrupting the status quo. They expressed concerns that HMRC and the platform could get tax calculations wrong and it would become a hassle to sort out incorrect deductions.

Dismissive

Those who were dismissive of the concept of deduction at source were generally concerned about a perceived loss of autonomy and that it would be disruptive to their level of earning. These were generally platform users earning most or all of their platform income from one or two platforms.

This group also understood and respected the aim of the deduction at source concept, mainly as a way to target those not paying the right amount of tax. However, they felt they were already managing their tax and ‘doing the right thing’ (often with a trusted accountant) and so they saw deduction at source as likely to disrupt and complicate their situation. They also feared a loss of autonomy, disliking the concept of having to report to someone and being treated as an employee rather than maintaining control over their own finances.

I don’t like the sound of that. I prefer that my accountant is in control of my tax affairs. I’ve always been self-employed and this sounds like it wouldn’t be the case anymore.

Gig Economy user, driver, North West England

Within this group, people on a lower income thought they might stop using the platform if deduction at source was introduced. Those on higher incomes (earning at least half of their total income through the platform, and earning enough to pay tax) thought they might switch to less regulated platforms. The perceived impacts for each of the groups is explored in more detail in the following chapter.

The following quote from a Gig Economy user, introduced in a case study on page 15, highlights the more dismissive views on deduction at source, which this user felt would result in a loss of autonomy.

I wouldn’t like that. I don’t mind filling out my Self Assessment, and I’m not sure how they work it out if you do have deductibles. I wouldn’t really like that because we are self-employed, so we should be self-employed in every aspect of it. We should be able to get all the money that we’re owed, then we decide how much deductibles we have and we decide how much tax we pay after we’ve done the calculation.

Gig Economy user, delivery driver, Northern Ireland

9. Impacts, barriers, and incentives

Direct impacts

Participants were asked to identify the impact that deduction at source might have on the way they work. Most who were broadly positive or open towards deduction at source felt that it would not have a major impact, although they would reassess this if any additional administrative costs were high or their tax burden increased, or if they would need to start paying tax for the first time. If this was the case, many of those using the platform as supplementary income felt they might stop using platforms altogether. Others said they would revert to other ways of working or shift to less regulated platforms. 

It’s not helpful for me. It would be quite complicated because if they withheld the tax and it was wrong, that’s another admin thing for them to rectify. I don’t think it’s an effective use of resources.

Sharing Economy user, South East England

I have no interest in this at all. If [platform] started holding back money for tax, I’d leave them and go back to (name of company not shared) as I can work for cash in hand for them, which would suit me better.

Gig Economy user, delivery driver, Northern Ireland

The extent to which people were sensitive to additional admin costs or burden, as detailed above, varied according to whether they worked in the Gig or Sharing Economy, and the level of income they currently received.

For platform users in the Sharing Economy, the current level of effort required to use the platform was low. Therefore, the relative impact of needing to manage deduction at source felt higher as they would need to spend more time checking that the amount of tax deducted was correct and amending any mistakes. Platform users in the Gig Economy were concerned about the impact deduction at source would have on their pricing, claiming they would need to build this into their pricing structure. This was further complicated by the need to consider fluctuating hours and that these users tended to be working on a greater variety of platforms with different pricing structures in place.

Those earning at the lower end (earning below or just above the tax threshold) were particularly concerned about any additional admin burden and associated costs. They anticipated needing to spend more time updating or correcting any financial information HMRC held on them. Some platform users saw themselves paying more tax as a result of deduction at source. As a result, they felt they would have to assess the value of continuing to use the platform. If deduction at source was applied, these platform users would assess whether they were receiving enough income from the platform. If they were, they would continue using the platform reluctantly. For those not currently paying tax, deduction at source may persuade them to keep their earnings under the tax threshold.

Indirect impacts

Platform users in the Gig Economy particularly, who weren’t currently engaging with tax, felt that deduction at source would result in price rises across their particular service within the Gig Economy, since platform users may start building deduction at source into their pricing structure — something they felt wasn’t necessarily happening at present.

Concerns were also raised about creating an uneven playing field if deduction at source was not mandatory and only some individuals or platforms signed up to it. Similar concerns were expressed about competing on price with platform users on international platforms who would not be eligible for deduction at source. For example, a participant using a platform to offer tutoring services worried that they would be competing on price with tutors in other countries who did not need to build a tax into their pricing structure.  

Potential incentives of deduction at source

Participants typically appreciated that deduction at source would provide reassurance that they were doing the right thing in relation to tax, providing certainty about their finances and preventing unexpected tax bills.

Those new to Self Assessment or unsure about their tax obligations felt that the introduction of deduction at source could reduce their tax admin burden, minimising their need to engage with and learn how to complete a Self Assessment tax return. In contrast, those confidently managing their own tax affairs were concerned about the loss of control over their finances and increased admin burden if they needed to correct tax calculations.

However, for some, if deduction at source was mandated by HMRC, this would be sufficient persuasion on its own to use the platform with deduction at source.

Perceived barriers to deduction at source

Those who felt less trust in HMRC or platforms to manage deduction at source were less likely to want to change the status quo, and potentially complicate the payment process. This was particularly common for those who had good tax knowledge and had spent a number of years earning above the tax threshold. Those who had been self-employed for a number of years were concerned that deduction at source could remove the perceived autonomy and oversight of their tax affairs that they had from being self-employed. In comparison, platform users who were newer and earning less felt that deduction at source would remove the casual ‘side gig’ element.

We should be able to get all the money that we’re owed, then we decide how much deductibles we have and… how much tax we pay after we’ve done the calculation.

Gig Economy user, driver, South West England

Experiences of poor platform payment processes undermined participants’ trust in the platform to manage the deduction at source process correctly. An example of this was where the platform processed payments inconsistently. Some of these concerns related to whether international platforms sufficiently understood the UK tax system in order to administer deduction at source effectively. There were also concerns that platforms would see the withholding process as extra work and, in order to protect their profits, might pass on any additional management costs to platform users.

Companies using freelancers are doing it to save costs because they don’t want the hassle of employees and the tax responsibilities and everything else and they’ve chosen to establish their business in that way… We are independent contractors, that are not going to spend time doing admin like that or if they did they would probably say they would need to charge us for it and we are already on minimum income.

Gig Economy user, driver, North West England

Addressing these barriers

Participants identified a clear need for transparency, clarity and reassurance when considering deduction at source.

In order to provide transparency, the process of deduction at source needs to be clear. Platform users expected clear communications in advance from HMRC on how deduction at source would be calculated, and what steps HMRC would take to ensure it was correct. They wanted to have easy access to HMRC to be able to ask questions about how their tax had been calculated.

Platform users wanted HMRC to provide clarity on how deduction at source would impact them. They wanted easy access to information on how the tax would be calculated according to their circumstances. This included information on how the process would be managed, what they could expect to happen and how mistakes would be corrected. They expected personalised information on the level of tax they could expect to pay. Platform users suggested that this could be provided through a variety of different routes, including chatbots, face-to-face, phone, and emails. They wanted to see a guide to the process and an FAQ before the scheme was implemented so they could review the potential impact on their platform use.

Platform users wanted reassurance that any deduction at source would be calculated correctly to reflect their circumstances and, specifically, that they would not end up over or underpaying tax if their earnings fluctuated, or if their earnings came from multiple sources. They wanted to have clear information on what to do if problems arose if deduction at source was calculated incorrectly.

10. Technical Appendix

10.1 Research Appendix

The study began with a pilot stage, involving 8 face-to-face interviews with platform users, to test the research materials. Interim findings from the pilot stage were presented to HMRC and research materials were adapted accordingly. The mainstage research involved a further 41 in-depth interviews, conducted both face-to-face and by telephone, with users of online platforms.  

Prior to the interview, participants completed a diary exercise to map out their working patterns and routines over the previous month and to think about how their use of online platforms fitted into this (see appendix for pre-task). Interviews lasted up to 60 minutes, exploring participants’ working patterns and behaviours; tax arrangements and needs; attitudes and perceptions towards employment; the platforms they operate on; and their responses to the proposal of deduction at source. The interviews also explored their perceptions of direct and indirect impacts associated with the introduction of deduction at source.

10.2 Sample Tables

Sample Characteristics
Sharing Economy	Gig Economy
24	25

Platform size (number of employees)	Sharing Economy	Gig Economy
Large (250+)	10	10
Small (<250)	14	13
Unsure	0	2

Platform use	Sharing Economy	Gig Economy
Primary income source	7	11
Supplementary income source	17	14

Age	Sharing Economy	Gig Economy
18 to 34	11	13
35 to 50	9	11
55+	4	1

Sector	Sharing Economy	Gig Economy
Catering or food (such as Deliveroo, Just Eat, Ubereats)	0	4
Labour or general services (such as TaskRabbit, Handy, Peopleperhour)	0	3
Logistics or parcel delivery (such as Parcelly, Hermes, Yodel )	0	4
Property/accommodation (such as Air BnB, Beds on Board, Airsorted)	18	0
Storage	0	0
Transport - Rides (such as Uber, Lyft, LiftShare)	0	2
Transport - Parking or Vehicles (such as Easycar, JustPark)	6	5
Tutoring	0	7

Location (face to face and teledepth)	Sharing Economy	Gig Economy
North East	0	0
North West	2	6
Yorkshire and the Humber	1	0
East Midlands	0	1
West Midlands	0	0
East of England	0	0
South East excluding London	3	6
South West	4	2
London	8	4
Scotland	1	3
Wales	0	0
Northern Ireland	5	3

Gender	Sharing Economy	Gig Economy
Male	13	13
Female	11	12

1. These research objectives have been adapted from the time of commissioning to focus solely on platform users. The study originally sought to include interviews with platform business representatives. However, due to difficulties recruiting this population, the report focusses solely on online platform users. ↩

2. Link to the report: Good work: the Taylor review of modern working practices (https://www.gov.uk/government/publications/good-work-the-taylor-review-of-modern-working-practices) ↩

3. Link to the government response to the report: Good work: the Taylor review of modern working practices (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/679767/180206BEIS_Good_Work_Report__Accessible_A4.pdf)   ↩

4. Link to the broad call for evidence on the role of online platforms in ensuring tax compliance (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/754206/The_role_of_online_platforms_summary_of_responses.pdf) ↩

5. Link to more information about the government ‘Rent a room scheme’ (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme) ↩