While the tax rules haven’t changed for individuals who sell goods or services online, this new development means HMRC has the right to access more information from online platforms. It is an effort to ensure people report income from these popular platforms through self-assessment returns.
This new requirement also covers overseas platforms, as it falls under the rules of an OECD (Organisation for Economic Cooperation and Development) collaboration. Any trading on internationally-based sites will also be reported to HMRC.
Information which will be passed to HMRC
HMRC already had the power to ask platforms for information. From 1 January 2024, however, the platforms will have to submit an annual report. To do so, the platforms will collect additional information, such as the sales volume and the income that sellers generate. The first reports are due at HMRC by 31 January 2025.
To help HMRC and other tax authorities match up information about taxpayers, the online platforms now have to share in their annual report:
- identifying information (name, address, date of birth etc.) for sellers
- how much sellers have earned on the platform
- bank account numbers/sort codes for the sellers
For those letting property, details of the property will be included.
Activities affected include selling:
- Products you’ve made (eg via Etsy)
- Goods you have bought and are selling on (eg via Vinted or eBay)
- Services such as taxi driving, food delivery, childcare, plumbing etc
- Renting out parts or all of your property (eg on Airbnb) or a vehicle
Are there any exemptions?
If you have fewer than 30 online sales or they generate less than approximately £1700 (€2000) in a year you will not be included in a report (but you may still need to include details on a tax return if other criteria are met).
The ‘trading and property allowances’ mean that if you earn less than £1000 from trading or property income (before expenses, including platform fees and other costs) you don’t have to report it to HMRC or pay any extra tax.
If you earn above the £1000 threshold
Above the £1000 threshold, you will need to report your income via self-assessment. The tax you incur will depend on your other income and whether you’re seen to be trading. For more information about what does or doesn’t constitute as trading online, see this guide from HMRC which shares different examples.
Remember, tax is paid on your profits so, if you are delivering a trade, you need to keep a record of all related costs – such as materials, postage costs, commission etc.
What to do next
Calculating your combined income for tax purposes can be difficult when selling or trading on online platforms. If you need help, contact one of our specialists or HMRC’s income tax helpline.
Do inform HMRC of your online platform income rather than wait for them to notify you. File a self-assessment tax return for the 2022/23 tax year before 31 January 2024. The return process will apply all the allowances you’re entitled to, so you may not owe any tax. However, If you do, that must be paid by 31 January to avoid interest and HMRC issuing you a penalty.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
Copyright © Shipleys LLP 2024
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