Anyone selling goods or services via online platforms needs to be aware of new rules regarding the way that digital platforms such as eBay share information with HMRC; it could affect the amount of tax they have to pay.
From 1 January 2024, online ecommerce platforms, including AirBnB, Etsy, eBay and Vinted, must now share details of the traders using their sites and the income those users have made with the UK tax body HMRC. Any website in any location that has signed up to rules set out by the Organisation for Economic Co-operation and Development (OECD), will collect information on UK sellers and share it with HMRC.
It means that HMRC will be able to scrutinise the online earnings of anyone selling clothes on Vinted or Depop, selling crafts on Etsy, renting a spare room on AirBnB or trading on eBay. These rules also affect freelance job platforms such as Fiverr, Uber and Deliveroo - sites that have become a popular way to for self-employed people to work in the gig economy.
The information collected is likely to include a national insurance number as well as what the traders have earned and paid in fees. Those affected must complete a tax return, declare their online earnings and pay any tax owed. Many Brits that have been running side hustles are likely to be affected.
How the new rules will affect online sellers
Not everyone will have to pay tax on their online sales:
- A trading allowance allows UK residents to earn up to £1,000 in a tax year without paying tax.
- Anyone renting out a room in their own house on AirBnB can take advantage of the rent-a-room scheme that allows you to earn up to £7,500 a year tax-free.
- Selling your own belongings will not trigger a tax bill. According to The Guardian newspaper, HMRC has said that people selling off clothes or items that they originally bought at a higher price will not be liable for tax on that income.
- Gumtree has said that it is not affected by the new rules as it does not facilitate payments.
However, most ecommerce marketplaces are affected and they could be fined if they fail to provide information about sellers. The first reporting deadline for these platforms will be one year after the rules are introduced, on January 31, 2025. This data will cover all sales made in 2024.
"The focus on side hustle tax by HMRC highlights the importance of accurately reporting any income outside of PAYE. It is very important for individuals with any income via ecommerce and market sites such as eBay, Vinted, Etsy and AirBnB to understand their tax obligations. That being said, there has been confusion over individuals who sell their own belongings via marketplaces such as Facebook; in this instance no tax is payable. You pay tax on what you buy/make to sell for a profit." Mike Parkes,GoSimpleTax.
Martin Lewis of Money Saving Expert has pointed out that this is not a new tax. He said: "What has changed is that HMRC will be able to find out what people are making on digital platforms more easily, so now is a good time to check if you owe tax or if you may do so for future earnings."
Lewis also explains that customer details will only be automatically shared with HMRC "if you're selling 30 or more items a year or have total earnings over the equivalent of €2,000 (currently around £1,700)." Even so, he reminds Brits that anyone earning over £1,000 from online selling may still have to pay tax on those earnings.
Written by Rachel Miller.
