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27th February 2024
Brits selling second-hand goods or letting out their property online are being targeted by the taxman as part of a clampdown on those not declaring second incomes.
Under the new measures, online marketplaces such as eBay, Amazon, Etsy, Depop and Vinted will be required to report how much money their users are making and report it to the UK’s tax authority.
The new measures are an attempt to weed out those who are making taxable income on a so-called ‘side hustle’ that they have not declared.
An HMRC spokesperson said: “These new rules will support our work to help online sellers get their tax right first time. They will also help us detect any deliberate non-compliance, ensuring a level playing field for all taxpayers.”
Who is affected?
The crackdown is aimed at those who make a second income of more than £1,000 a year online, such as selling secondhand clothes on sites such as Depop and Vinted, letting out their property on Airbnb or delivering takeaway food for the likes of Deliveroo.
Once sellers pass the £1,000 threshold, they may have to register for self-assessment and pay tax on their earnings.
Does that mean I will have to pay tax on things I sell online?
Not necessarily. It all hinges around whether you are deemed to be a ‘trader’ or not, according to the Low Incomes Tax Reforms Group (LITRG).
For example, if you’re selling unwanted personal items such as old children’s clothes or toys online as a one-off, then you are unlikely to be deemed to be ‘trading’, LITRG says. These types of transactions are ‘generally not taxable’, even if you make a significant amount of money, it adds.
However, you may be liable for tax if this is deemed a regular activity and you’ve crossed the £1,000 threshold.
When does it come into effect?
The new rules came into effect on 1 January, although online marketplaces will not start reporting user data to HMRC until January 2025.
Why has this been introduced?
The market for second-hand goods, particularly fashion items, is booming. Websites such as Depop and Vinted have reported surging sales at a time when many fashion retailers have struggled.
A recent report by US marketplace ThredUP suggested the global market for second-hand apparel alone could more than double to $350bn (£276.3bn) by 2027.
Given that many of those who sell on these marketplaces are individuals and not businesses, it has led to concerns that many are not paying tax when they should.
Is this a new law?
Yes and no. There are technically no new tax obligations on individuals: if you made £1,000 or more selling goods online before now and were deemed to be ‘trading’, you likely already had to pay tax on it.
The major change announced this month is the requirement for online marketplaces such as eBay and Amazon to report their users’ data to HMRC routinely.
Do I need to do anything?
Victoria Todd, Head of LITRG, says: “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.”
However, if you are unclear whether you should be paying tax on income from goods you sell online, then it’s worth contacting HMRC as soon as possible.
