From 1 January 2024, digital platforms such as Vinted, Gumtree, eBay, and Airbnb will be required to report seller data to HMRC. This will include the names of individual sellers and volume of their sales and is part of a clampdown by HMRC to ‘bear down on tax evasion’.
So, if you sell goods online, rent out your home on Airbnb, or earn extra income from providing services via platforms including Deliveroo or Uber, then it’s vital to check if you need to pay tax or declare your income through self-assessment.
This isn’t a new tax but it does give HMRC far greater visibility over your earnings.
There are no new rules – anyone topping up their primary income by making profit selling items or services through online platforms may already have to pay tax on their earnings.
People are allowed to earn up to £1,000 a year in additional income by selling goods or services in one financial year (between 6 April in one year to 5 April in the next), but sellers must register as self-employed for anything over this threshold and file a tax return.
It should be noted that rules don’t apply to cashback sites, such as Quidco and TopCashback – cashback is not taxable.
HMRC says that this is a bid to clamp down on tax avoidance and that it is investing an initial £36.9m in developing a system for online marketplace reporting and has hired a team of 24 full-time staff to work on the project.
This new, automatic data sharing process also covers overseas platforms and is being implemented after the UK signed up to rules by the Organisation for Economic Cooperation and Development that aim to tackle tax evasion globally.
The online market places will be obliged to report the financial details of any sellers who have made 30 transactions or more and made over €2 ,000 (around £1,700) and this will include their bank account details as well as a history of their transactions.
So, online platforms will not have to report individuals with less than 30 sales regardless of the value of the amount sold.
The online platforms will have until January 2025 to report this information, and if they provide information to HMRC, they will tell the individual they have done so.
If you are selling goods or services through online platforms and you don’t want to be subject to self-assessment, then you need to keep within the £1,000 tax free limit.
The platforms will have to start automatically sharing information with HMRC by 31 January 2025. This means that the first lot of data sharing will cover the current 2023/24 tax year and whilst the severity of the crackdown is yet to be seen, our advice would be to get on top of it now.
Need our help or advice, get in touch at firstname.lastname@example.org