HMRC to receive more information on online sales

What’s happening?

From 1 January 2024, digital platforms will have to make annual reports to HMRC about those who sell goods or services through them. The tax rules for individuals who sell goods or services online have not changed - these new rules just mean that HMRC will have more information about what is happening online.

What’s a digital platform?

A digital platform is a website or app that facilitates transactions between sellers and their customers. Well known platforms include Etsy, Ebay, AirBnB, JustPark, Taskrabbit, Vinted and DePop. The use of such platforms has grown rapidly in the sharing and gig economy, but this isn’t always visible to tax authorities.

HMRC has had the power to ask platforms for information for a while now. This change means that UK based platforms will now have to report to HMRC every year, without being asked. So HMRC will receive a huge amount of additional information automatically.

These rules are part of a global initiative from the OECD (Organization for Economic Co-operation and Development) – a group of countries who collaborate to develop policy ideas. HMRC won’t just collect and use data from UK platforms, but will also receive data from overseas platforms. It means that even if you’re selling or renting property on a non-UK platform, HMRC could still receive information about you. HMRC will also provide details they receive about non-UK residents to their tax authorities.

Who might be affected?

The new reporting rules will apply to sales of both goods and services through digital platforms. For example, it will cover:

• selling things you’ve made eg on Etsy
• selling goods you have bought eg on Vinted or Ebay
• selling services such as driving a taxi, food delivery or small jobs 
• renting out property, including everything from part of your driveway to a holiday home.

Platforms will report information on all UK based sellers (or those renting out UK property) registered with them, unless they are ‘casual sellers’ - making fewer than 30 sales a year for no more than 2,000 euros. Sellers need to be under both of these thresholds for their information not to be shared.

Platforms are only exempt from reporting if they either don’t allow sellers to make a profit, or don’t have any reportable sellers. Websites that just provide lists of adverts (like Gumtree), but don’t get involved in handling the proceeds of a sale, are also exempt.

What will be reported?

The new rules come in from 1 January 2024, but the first reports won’t be filed until January 2025.

Information shared with HMRC will include identifying information (name, address, date of birth etc.) for sellers but also how much they’ve earned and bank account numbers / sort codes. For those letting property, details of the property will be included.

This will help HMRC, and other tax authorities, match up information about taxpayers.

Platforms will also be required to send a copy of the information reported to HMRC to the seller themselves.

What should sellers do?

Sellers who think they may have tax to pay shouldn’t wait for HMRC to get in touch. If they do, they could end up with not just a tax bill, but also additional interest and penalties.

When it comes to deciding whether or not you may have tax to pay, the first question to ask is whether what you are doing counts as a trade? If you are just clearing out the attic or selling unwanted Christmas presents that shouldn’t be a trade, and tax shouldn’t be payable. However, if you are buying in or making things with a view to profit, then you are more likely to be trading.

If you are trading, the next question to ask is how much money are you making? Since 2017 taxpayers have been allowed to earn up to £1,000 of trading or property income (before expenses) without having tax to pay. If you are over the value of this £1,000 trading / property allowance, then you should consider getting in touch with HMRC to register for self-assessment.

Remember, you only pay tax on your profits, so if you are carrying out a trade, you will need to keep a record of all the related costs, including buying the goods or materials in, postage or delivery costs and any commission taken by the platform.

Other resources

If you are concerned there are some more detailed guides below:

New rules for gig economy workers - your questions answered – a guide by the Low Incomes Tax Reform Group

Selling online and paying taxes - information sheet – guidance from HMRC