Selling that unwanted Christmas jumper? The taxman might know about it

Are you one of the millions of UK individuals selling second hand clothes on digital platforms? Whether you’ve been caught by the Marie Kondo urge to declutter and detoxify your wardrobe, you are trying to get rid of a few pairs of (designer?) shoes to make room for some new ones, or have built up quite a side hustle and have turned to platforms such as Vinted, Vestiaire Collective, eBay or Etsy, you should know that starting from 1 January 2024 platforms will be required to collect data on how much you make, which they must report to HMRC. The measures also impact those renting out properties on Airbnb (among other platforms) or people selling their services online, and these platforms have been warned to brace themselves against landing in hot waters with HMRC. 

The first reporting deadline for online platforms will be 31 January 2025 and to meet these requirements they will need to implement new ways of collecting seller information so that HMRC can match and verify it against taxpayers’ records to make sure individuals are correctly reporting their income on their tax returns. There will be hefty fines and penalties for failing to submit reports or submitting “inaccurate, incomplete, unverified sellers’ records” so the platforms will be incentivised to ensure they meet their reporting obligations.

If you are an occasional seller receiving no more than EUR2,000 for fewer than 30 sales in a reporting period, your information is not required to be provided to HMRC. However, that doesn’t mean you do not have any tax reporting obligations. 

Depending on whether you have a profit-seeking motive (for example, some online platform users buy premium items from outlets and then sell them at a profit online), the number of transactions you make, or the nature of the assets you sell, your little side hustle might be seen as trading in which case a self-assessment tax return will need to be filed with HMRC and income tax and National Insurance contributions paid accordingly. If you make sales of £1,000 or more in a year, you will need to consider whether a tax return is required. 

The good news is, the information collected by platforms must be shared with HMRC as well as with sellers, which should help taxpayers get their affairs right. It could however bring a whole new raft of unaware individuals within HMRC’s reach and could make some taxpayers think twice about their wardrobe spring clean. 

Considering the fast approaching deadline, digital platforms need to be ready to start collecting information in the New Year, but HMRC should also take steps to ensure that sellers are aware of the potential tax implications they may face and educate them appropriately.