In a move to tighten the tax net, HMRC has announced new measures affecting individuals engaged in online "side hustle" activities, such as selling clothes on Vinted, letting out spare rooms on Airbnb, or trading goods on eBay.
As of January 1, 2024, digital platforms like these are now obligated to collect and share transaction details with tax authorities, signalling a global effort to curb tax evasion. This article aims to provide insights into the implications of these changes and offer guidance on what online sellers need to do to ensure compliance with the new rules.
The Impact of New Rules
The new regulations require platforms to routinely report sellers' income, covering various transactions such as; sales of handcrafted goods, second-hand clothes, taxi services, food delivery, freelance work, short-term accommodation lets, and more. This information will be shared among countries that have adopted the OECD tax rules, facilitating a concerted effort to clamp down on tax dodgers.
What are the Key Obligations for Online Sellers?
1. Tax-Free Allowances: Individuals already paying tax do not need to alter their current practices. There is a £1,000 tax-free allowance for income generated through property and a similar allowance for "trading" income, applicable to activities like tutoring, gardening, or selling new or second-hand items online.
2. Record-Keeping: While those earning below the specified thresholds may not be required to fill in a tax return, it is advisable to maintain detailed records in case they are requested by tax authorities.
3. Thresholds for Reporting: Platforms will report information to HMRC at the end of January 2025 for sellers whose activity is of significant size. The reporting obligation applies to sellers making more than 30 transactions or £1,735 a year. Sellers below these thresholds are not subject to reporting requirements.
Advice for Online Sellers
It is likely that only a small proportion of casual users of sites like Vinted and eBay will trigger the reporting thresholds, but individuals are required to assess their own tax situation.
If you believe that you may have surpassed the minimum £1,000 trading allowance, then the team at Dixcart can help. We can also help you make contact with the tax authorities as it is advisable to contact them pre-emptively, if there is any income to declare.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
