Selling online – what has really changed?

09 January 2024

As we have highlighted in a previous weekly tax brief story, new reporting requirements kicked in from 1 January 2024 for digital platforms, which are now required to collect data on how much individuals and businesses make and report it straight to HMRC. 

There has been a wave of news articles and TikTok videos discussing the changes and how they will impact individuals. As catchy as the online voice of doom is, the bottom line is that the tax rules have not changed because of these new reporting obligations. In fact, the new reporting requirements only affect digital marketplace platforms who now must collect data and pass it on to HMRC. 

HMRC took to LinkedIn with a myth busting video and made it clear that this is not a witch hunt for the few pounds made by people selling their old clothes as they refresh their wardrobes.

Broadly, for occasional sellers receiving no more than €2,000 (EUR) for fewer than 30 sales in a reporting period, their information is not required to be provided to HMRC by the platform. However, that doesn’t mean the seller does not have any tax reporting obligations, it depends on whether they are trading for tax purposes. 

If the seller is deemed to be trading, a self-assessment tax return (SATR) may need to be filed with HMRC and income tax and National Insurance contributions paid accordingly, even if the total sales are less than €2,000. However, the trading allowance may be available which should simplify things for those carrying out small side hustles. This allowance allows up to £1,000 of sales made by an individual to be exempt from income tax each tax year. As a result, individuals with gross sales of £1,000 or less do not need to report the income to HMRC or pay any income tax on it. If they make sales of £1,000 or more in a year, they will need to consider whether a SATR is required. Alternatively, if they make a loss for tax purposes, they may wish to file a SATR to claim tax relief on that loss. 

In relation to the platforms affected by these rules, they will be required to collect and report identification and sales information in relation to sellers. A key aspect of the rules is for platforms to conduct due diligence on its sellers to ensure the information reported is accurate. The platform will need to use all available resources to complete the checks and keep records for evidence. 

Platforms need to act now to determine if they fall within the reporting requirements, and if so, commence collecting the information HMRC require. In the meantime, most taxpayers can rest easy that they are not going to be hit with a surprise tax bill from their online sales.

Miruna Constantin
Manager, Private Client Services
AUTHOR
Sarah Goodwin
Manager, VAT Planning & Advice
AUTHOR
Miruna Constantin
Manager, Private Client Services
AUTHOR
Sarah Goodwin
Manager, VAT Planning & Advice
AUTHOR