Digital platforms must now disclose sellers' income, HMRC
Sales on Ebay, Etsy and other platforms will now by tracked for tax purposes
In a bid to crack down on tax evasion and boost revenues, the UK's HM Revenue and Customs (HMRC) has implemented new tax rules, effective from 1st January 2024, targeting small sellers on platforms such as Etsy, Depop, Airbnb and Vinted.
The updated regulations mandate these platforms to record and report the income of their sellers directly to HMRC, in alignment with rules set out by the Organisation for Economic Co-operation and Development (OECD).
The OECD regulations took effect in the European Union on 1st January 2023, but their implementation in the UK was postponed until 1st January 2024.
"While HMRC already has the power to access information from UK-based platforms on the income of sellers on the platform, implementing the OECD rules will enable HMRC to exchange information with other tax authorities to access data from platforms based outside the UK quickly and efficiently," the tax agency said.
The new measure is anticipated to affect between two and five million businesses offering products or services through digital platforms, including taxi and private hire services, food delivery services, freelance work, and short-term accommodation rentals.
As part of the rules, websites in countries that have signed up to OECD rules will collect information on UK-based sellers, including their name, address, date of birth and national insurance number, along with earnings and fees paid on the platform.
For those letting properties, the address of the property will also be required.
For sellers who are already diligently declaring their earnings and paying taxes, the impact will minimal. However, those who fail to fulfil their tax obligations may face demands from HMRC.
Brits can earn an additional £1,000 in income each tax year, referred to as the Trading Allowance, alongside their regular employment. However, exceeding this threshold requires reporting the additional income to HMRC through self-assessment and fulfilling the associated tax obligations.
Sellers using platforms like Airbnb to offer accommodation within their own homes can use the rent-a-room scheme, allowing them to earn up to £7,500 a year tax-free.
HMRC plans to send "nudge" letters to individuals who may not be aware of their tax obligations related to their online side hustles.
"Individuals who regularly sell goods or services through online marketplaces may need to declare this income. We believe our customers want to pay the right amount of tax, and our online guidance can help customers to do so," the agency said.
"This is routine activity. Each year we send out thousands of reminder letters on various areas of tax."
To enforce these measures, HMRC is allocating £36.69 million and will employ 24 full-time staff.
The first reporting deadline for platforms is set for 31st January 2025, one year after the rules come into effect.
Vinted, a popular resale site, has assured its sellers that it is working on tools to simplify compliance with the new rules and will provide information and guidance throughout the coming year.
"We are currently finalising some tools, and we'll be contacting eligible sellers through next year with information on the steps they need to take, and why," it said.