Online sellers urged to check their tax position
Individuals selling online need to make sure they are up to date with their tax affairs before HMRC come knocking, says the Association of Taxation Technicians (ATT).
In a recent post on Twitter/X, HMRC warned individuals selling goods or services online that some digital platform operators in the UK will soon be required to share their details with HMRC.
This follows changes introduced in January this year, under which digital platforms (such as Etsy, EBay, Vinted and AirBnB) will have to make annual reports to HMRC about those who sell goods or services through them. 1
Senga Prior, Chair of the ATT Technical Steering Group, said:
“It’s important to remember that the tax rules for individuals selling goods or services online have not changed. These new rules just mean HMRC will have more information about what taxpayers are doing.”
Information shared with HMRC about sellers will include identifying information and how much they’ve earned. This will help HMRC identify those who haven’t been paying tax when they should have been.
Senga Prior continued:
“If you think you might have tax to pay you shouldn’t wait for HMRC to get in touch. If you do, you could face interest and penalties on top of the tax bill.
“However, just because you sell online it doesn’t necessarily mean you will have tax to pay. In order to be taxable, you have to be carrying out a trade – for example buying in or making things with a view to selling them online. If you are just clearing out the attic or selling old clothes you no longer need that shouldn’t be a trade, and tax shouldn’t be payable.
“Even if you are trading, you can earn up to £1,000 of income (before expenses) a year without having tax to pay. If your online sales exceed this total in a year, you may need to register for self-assessment with HMRC. For those who surpassed this threshold in the tax year that ended on 5 April 2024, the 5 October deadline to register is fast approaching.
“You should also keep a record of any costs you incur, including buying goods, packaging or postage, as you will be able to claim a deduction for these.”
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 and earning no more than 2,000 euros a year.
Senga Prior added:
“It’s important to remember that the 2,000 euro threshold only dictates whether or not a platform has to report your information – it is not relevant to whether you will have tax to pay or not. It’s entirely possible to have a tax liability, even if your income isn’t being reported to HMRC.
“The key is whether you are trading or not. If you are, then the crucial figure for individuals is when you reach an income of £1,000 before expenses – if your sales exceed this figure you may have tax to pay.”
Notes for editors
1. Visit the ATT website for more on these rules.