- Written by Lucy Hooker
- BBC News business reporter
Are you making money selling clothes online? Could renting out your spare room be a good way to make some extra money?
People who make money from such online “side hustle” activities will find the tax net tightening this year.
From January 1, companies including Vinted, Airbnb, and eBay will be required to collect details of such transactions and share them with tax authorities.
This will allow HMRC to identify people who should have declared their casual income but have not.
HMRC was already able to request information from UK-based online businesses, but there are new rules the UK signed up to through the international organization Organization for Economic Co-operation and Development (OECD) from earlier this year. It’s part of a global effort to crack down on tax evaders.
The new rules require digital platforms to regularly report revenue sellers passing through their sites. This includes not only the sale of handmade items and second-hand clothing, but also services such as taxi hire, food delivery, freelance work, short-term accommodation, and renting out driveways as parking spaces.
This information is shared between countries that have signed up to the OECD Tax Regulations.
The government said the new rules would help “deter tax evasion” as sellers on digital platforms will now be treated like traditional businesses.
An HMRC spokesperson said: “These new rules support our commitment to helping online sellers get their tax paid right the first time. They also help us detect deliberate breaches. will also help ensure a level playing field for all taxpayers.”
The first obligation for businesses to report information to HMRC will be imposed at the end of January 2025 and will include information such as tax IDs, bank account details, and transaction amounts and volumes for sellers with sufficiently large activity.
What do I need to do?
- Online sellers who already pay taxes do not need to change what they are already doing
- Individuals have a tax-free allowance of £1,000 on money earned through property.
- You will also receive a £1,000 allowance for ‘trading’ income. For example, if you offer tutoring or gardening, or if you sell new or used goods online.
- People with incomes below these thresholds may not have to fill out a tax return, but they should keep records in case they are required to do so.
Adam Jay, chief executive of second-hand marketplace platform Vinted, told the BBC he didn’t think the new rules would affect many of the site’s sellers.
“It’s actually a small percentage of users of our platform that triggers this threshold that we have to provide information to,” he said.
Businesses will not be required to share data about sellers who have fewer than 30 transactions or make less than €2,000 (£1,735) a year.
“The only people who are subject to tax are those who make a profit from the sale of second-hand goods, and what tax HMRC ultimately pays will depend on their own personal tax situation.” he said.
“We will be proactively reaching out to these sellers to explain why the new requirements exist.”
Emma Lawson, a tax expert at the Institute of Tax Technicians, told the BBC’s Today program that the new rules mean people will have to pay tax if they clear out their loft and sell things online or make money with crafts. He said some wary people may still be turned away. hobby.
The important things to think about, she says, are whether what you’re selling qualifies as ‘trade’ – for example, if you’re actively buying clothes to sell – and how much income you’re making. Told.
He said anyone who believes they have income above the £1,000 minimum trading allowance should contact their tax authorities.
“Don’t wait for that letter to arrive or for HMRC to contact you,” she said. “It’s a good idea to consider the potential tax consequences of filing in advance, as there may be penalties for not filing.”