Are you earning a tidy sum from online clothing sales or making a profit from renting out your spare room? For those involved in such online ‘side hustles’, it’s essential to be aware that tax regulations are becoming stricter this year.
Starting from 1 January, platforms like Vinted, Airbnb, and eBay are now required to gather and share transaction details with tax authorities. This development enables HMRC to target individuals who may not be declaring additional income.
Previously, HMRC could request data from UK-based online services, but new international regulations under the Organisation for Economic Cooperation and Development (OECD) now make this process more stringent. The UK, being a participant in this global initiative, has agreed to these enhanced measures aimed at curbing tax evasion.
Under the new regulations, digital platforms must routinely report income earned by sellers on their sites. This applies not only to goods like handmade items and second-hand clothing but also services such as taxi hire, food delivery, freelance work, short-term lodging, and even driveway rentals for parking.
This information exchange will take place among countries that are part of the OECD tax framework. The UK government believes these rules will help combat tax evasion, treating digital sellers more akin to conventional businesses.
An HMRC spokesperson has commented, ‘These new rules bolster our efforts to ensure online sellers are tax compliant. They’re instrumental in detecting deliberate non-compliance, thus ensuring fairness for all taxpayers.’
The first reporting deadline for firms is set for the end of January 2025, covering details like tax ID, bank account information, and the transactional value and volume for significantly active sellers.
For online sellers who are already tax-compliant, no changes are necessary. Individuals enjoy a £1,000 tax-free allowance for property-related earnings and a similar allowance for ‘trading’ income, which includes activities like tutoring, gardening, or selling items online.
Adam Jay, CEO of Vinted, believes the new rules won’t impact many of their users. According to OECD guidelines, data on sellers with fewer than 30 transactions or €2,000 (£1,735) annually need not be shared.
Emma Rawson, a tax expert, expressed concern on the BBC’s Today programme that these new rules might discourage people from selling online or pursuing craft hobbies due to tax fears. She advises anyone potentially earning above the £1,000 allowance to proactively contact tax authorities to avoid potential penalties.”
