Background
Millions of UK individuals often now sell second hand clothes on digital platforms, whether to declutter their wardrobe, discretely dispose of that unwanted Christmas jumper or as a side venture on platforms such as Vinted, eBay and Etsy. Vinted for example has over 8 million registered sellers in the UK with some users claiming they have turned selling second hand clothing into a full-time job. New information powers are due to come into force which will enable HM Revenue & Customs (‘HMRC’) to receive details of this online income.
From January 2024 digital platforms will have to report sellers data to HMRC and this will not just cover sellers of second hand clothing but many other forms of online income as well. Digital platforms such as eBay, Vinted and Airbnb will be included in the data HMRC will collect.
Detail
New rules will come into force from 1 January 2024 requiring digital platforms to start collecting seller data which they will then be required to pass over to HMRC. The information HMRC receive will be used to match against taxpayers’ records to ensure people are correctly reporting their income on their tax returns.
The measures being introduced will not only impact sellers of goods but also those renting out properties on Airbnb, as well as other rental platforms, or individuals selling their services online.
The first reporting deadline for online platforms will be 31 January 2025, and there will be hefty fines and penalties for those platforms failing to submit reports or submitting ‘inaccurate, incomplete, unverified sellers’ records’ in order to incentivise them to meet their reporting obligations.
For the occasional seller receiving no more than £1,700 for fewer than 30 sales in a reporting period, their information will not need to be reported to HMRC. However, this does not mean that such an individual 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 premium 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 online with HMRC. There may well then be income tax and National Insurance contributions to be paid on such income.
The information collected by online platforms and shared with HMRC will also be required to be shared with the sellers themselves. This should assist individuals in becoming aware that they may have a reporting requirement and to helping in getting their tax affairs in order.
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.
To see our other news items please visit our Muras Baker Jones – Blog.