New Tax Reporting Rules for Digital Platforms: What Sellers on eBay, Etsy, Airbnb, and Vinted Need to Know

New rules introduced on 1 January 2024 may affect you if you sell goods or services; rent accommodation or space; or take up driving jobs on digital platforms

New rules introduced on 1 January 2024 may affect you if you sell goods or services; rent accommodation or space; or take up driving jobs on digital platforms.

Typically, you need to be aware if you:

• Buy and sell clothes or household items (e.g. eBay, Vinted, Etsy etc),
• Sell homemade crafts or baked goods online
• Work as a driver (e.g.Uber)
• Rent out holiday accommodation.
• Rent out a parking space (e.g. Your Parking Space)

Trading Allowance

As a rule, if you earn less than £1,000 (gross) selling goods in a tax year you aren’t required to pay tax on this income, or to let HMRC know. This is the ‘Trading Allowance.’ However, it’s important to check that you’re within the ‘trading allowance’ if in doubt, it’s best to contact HMRC.

Contact HMRC

You need to let HMRC know if you make even £1 above your annual allowance. You can ask for your tax code to be changed or submit a self-assessment tax return.

Under the new rules introduced on 1 January 2024 digital platforms such as eBay, Uber and Airbnb are required to report information about the income people earn using their platforms directly to HMRC automatically by 31 January 2025 (which will impact the current tax year). Previously HMRC could ask for this data, but it wasn’t automatically reported.

Data will be shared on users who are selling 30 or more items a year or who have earned the equivalent of 2,000 euros (gross) in total in a year.

To add to this, overseas online platforms are required to share details of their UK resident sellers to HMRC. This includes platforms dealing with holiday lets. This is one of the International Organisation for Economic Co-operation and Development’s rules to help reduce tax evasion on a global scale.

Despite these new rules, the onus to report income earned on digital platforms to HMRC remains with the individual.

Are you an online trader?

You will be liable to pay tax on your earnings if HMRC considers you to be a trader. Broadly speaking this is the activity of regularly buying and selling items online to generate profit.

Selling items online you own but you no longer need and without intending to make a profit; is unlikely to be seen as trading by HMRC, even if you exceed the £1,000 trading allowance.

However, it’s advisable to check HMRC’s guidance on trading to confirm your status: www.gov.uk/check-additional-income-tax.

Rent A Room Scheme.

The Rent a Room scheme remains in place, and you can still earn up to £7,500 a year tax-free by letting out a furnished room in your home.

Letting HMRC know about historic income.

If you have been earning a small amount over your annual allowance in previous years, it is usually possible for you to file historic tax returns and pay the tax owed.

There is a chance that HMRC will issue penalties, but in many cases if you contact HMRC promptly, and there is a small liability, you may be treated kindly.

Voluntary disclosure

However, if there are larger amounts involved or if you have filed tax returns and neglected to include the extra income, you will need to make what is known as ‘a voluntary disclosure.’

A ‘voluntary disclosure’ means contacting HMRC and telling them about the additional income that was not previously disclosed. By taking the initiative, replying to HMRC quickly and paying any tax owed straightaway you may receive a less punitive penalty.

Don’t forget about National Insurance

It’s important to be aware that you may have to file a tax return to declare income earned from your hobbies even if you have no other income and earn below the personal allowance of £12,570. Although tax is not due on your income, you may still need to pay National Insurance.

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