Background
From January 2024 digital platforms were required to start collecting seller data to report to HM Revenue & Customs (‘HMRC’). Whether it is the selling of second hand clothing, unwanted Christmas presents, or another form of online income, digital platforms such as eBay, Vinted, Esty and Airbnb are now required to collate and report data to HMRC.
The first reporting year is to 31 December 2024 and the first reporting deadline for the online platforms is 31 January 2025. HMRC have recently issued a press release reminding taxpayers that whilst there is this new requirement for online sales data to be shared with them from January 2025, there are actually no changes in the tax obligations for people selling items or services via these digital platforms. It is important however for any online sellers to ensure they are registered for self assessment where they may have tax to pay.
Detail
The new rules came into force from 1 January 2024 requiring digital platforms that facilitate the provision of services, or the sale of goods, to collect and verify information about sellers before reporting it to HMRC annually, along with details of each seller’s income. Platforms that ‘facilitate’ sales to third-party buyers are sites that bring sellers and buyers together like Airbnb, booking.com, eBay, Etsy, Vinted and Uber. The information HMRC receive will be used to match against taxpayers’ records to ensure people are correctly reporting their income on tax returns.
There is no reporting obligation if you are selling your own goods and services from your own platforms.
Reportable details about sellers include:
- Name, address, contact details;
- Tax reference and place of tax residence;
- VAT or other sales tax reference;
- The country where the seller lives;
- The total amount paid to the seller for the reporting year (reported on a cash basis);
- The number of transactions for which the seller received payment;
- Any fees, commissions, or taxes which have been withheld or charged;
- Bank account details to which amounts were paid.
HMRC have confirmed that there are no new tax obligations for individuals selling services or unwanted items online despite these new requirements for the online platforms to share sales data with them. The recent press release from HMRC stated that individuals who are not trading and just occasionally selling unwanted items online will not have any tax to pay. However, as has always been the case, for those who are trading through websites or selling services online they may need to pay tax and to be registered for Self Assessment.
Individuals who sold at least 30 items, earned approximately £1,700 (equivalent to €2,000), or provided a paid-for service, on a website or app in 2024 will be contacted by the digital platform in January 2025 to say their sales data and some personal information will be sent to HMRC due to the new legal obligations.
For the occasional seller, their information will not need to be reported to HMRC by online platforms. However, this does not mean that an individual making occasional sales and receiving no more than £1,700 for fewer than 30 sales in a reporting period does not have any tax reporting obligations.
It is important to remember that what may be considered as just earning a little extra, HMRC might deem ‘trading’. It can depend on the number of transactions made, or the nature of the assets sold and on whether there is a profit-seeking motive, for example buying items from an outlet and then selling them at a profit online.
Individuals making sales of £1,000 or more in a year will need to consider whether they are required to file a self-assessment tax return with HMRC. There may well then be income tax and National Insurance contributions to be paid on such income.
The sharing of sales data does not automatically mean the individual needs to complete a tax return. However, those who may need to register for Self Assessment and pay tax, include those who:
- buy goods for resale or make goods with the intention of selling them for a profit;
- offer a service through a digital platform – such as being a delivery driver or letting out a holiday home through a website; and
- generate a total income from trading or providing services online of more than £1,000 before deducting expenses in any tax year.
HMRC is working alongside online platforms to ensure sellers receive clear guidance on their tax responsibilities.
If you would like further information on the tax impact of online trading, or on any of the points raised above, please contact our Tax Director, Jenny Marks.
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