Last updated: 09 Jan 2024 10:00 Posted in:
People making money from selling second-hand goods online could end up paying tax on their ‘side hustle’ earnings following the introduction of new rules by HMRC that came into effect on New Year’s Day.
From January 1, digital platforms such as eBay, Airbnb, Etsy, Amazon and Vinted must share seller information with HMRC as part of a crackdown, dubbed the ‘side hustle tax’.
The tax authority said the new rules will allow it to detect and tackle tax evasion, while also levelling the playing field with how traditional businesses are treated for tax purposes.
Vinted is reporting that some of its sellers have already closed their accounts as a result of the new tax.
The threshold for earnings from so-called ‘side hustles’ is set at more than £1,000 a year – above this, online sellers must register as self-employed and file a self-assessment tax return at the end of the financial year.
HMRC was already able to request information from UK-based digital platforms, but Britain has signed up to new rules that came into effect at the start of this year via the Organisation for Economic Cooperation and Development (OECD) allowing it to share information with other tax authorities to access data from platforms based outside the UK.
Online platforms will be required to report seller information directly to HMRC – although not until the end of January 2025.
This will include information such as tax ID, bank account details, as well as the amount and number of transactions made by sellers with sizeable trading activity.
It will apply to digital apps and platforms – including website providers to third-party sellers – and cover the sale of goods and services, such as handmade or second-hand clothes and items, alongside taxi hire, food delivery, freelance work and the letting of short-term accommodation or driveway parking.
However, the Low Incomes Tax Reform Group has reassured those selling goods and services online that they won’t be subject to a new side hustle tax. It said the new rules do not create any new tax obligations for individuals and the existing rules – about what platform income needs to be declared and who needs to register for a self-assessment tax return – have not changed.
Victoria Todd, Head of LITRG said: “People selling unwanted personal items such as their children’s old clothes or toys are not likely to be ‘trading’. Therefore, even if it is a significant amount, any money they make is generally not taxable.
“The new rules have caused a great deal of confusion, but they simply mean that HMRC are receiving more information from online platforms than they were before. If you are following existing rules and declaring your income as required, then you don’t need to worry or do anything differently.”
“The new rules have caused a great deal of confusion, but they simply mean that HMRC are receiving more information from online platforms than they were before. If you are following existing rules and declaring your income as required, then you don’t need to worry or do anything differently.”
Victoria Todd, Head of LITRG