In the ever evolving world of E-commerce, platforms such as eBay, Etsy and Vinted have connected millions of buyers and sellers worldwide. For those who rent out their homes, Airbnb, Booking.com and other similar sites have done the same for those looking for accommodation. Recent changes in tax regulations could have implications for sellers on these platforms. It is important that sellers understand these rules so as not to fall foul of HM Revenue & Customs (HMRC) and the associated tax implications. This is all part of HMRC’s wider aim to tackle tax evasion and treat digital platforms the same way as traditional businesses.

From 1 January 2024, online marketplace “digital platforms” are required to report seller activities to HMRC by 31 January 2025. These are a set of internationally agreed rules and cannot be avoided. The rules have been designed to tackle tax evasion by the Organisation for Economic Co-operation and Development. Sellers will be provided with the same reporting information that is being sent to HMRC. These should be used to report on a Self-Assessment tax return where necessary.

To calculate whether you will be required to declare income received from these platforms, HMRC has an area about additional income.

The legislation in the UK will apply to any digital platform that is resident for tax purposes in the UK.

The changes don’t affect what is known as the trading allowance. Also known as the trading and miscellaneous income allowance, it is currently set at £1,000 per tax year, this is the amount you can earn from trading or from casual and miscellaneous activities before you have to pay income tax and National Insurance.

“Occasional” seller exclusions apply. If you are unsure about what this means, then the guide for this is that you sell fewer than 30 items in a year or received less then €2,000 (approximately £1,700). In addition to this, providing you are not buying goods with the intention of selling them (trading), you will not be required to report this income. Selling of old, unwanted items, regardless of the income does not fall under these new rules.

According to HMRC: “A consistent, standardised international approach to provision of information will also be better for platforms as it is designed to prevent a patchwork of domestic reporting requirements.

“The rules will also make it easier for sellers on these platforms to comply and will help HMRC to detect and tackle tax evasion when they do not.”

A key point to remember is that you would only pay income tax on income from an online market place if that income was earned through a ‘trade’. So if you made some extra money selling unwanted belongings through eBay or Vinted for example, its unlikely that you would need to register for Self Assessment or pay tax on this income, even if it was more than £1,000.

However, if you are unsure whether you may need to register and declare your income then please contact one of our team who will be happy to help.