If you make some extra money, or run a side hustle, through platforms including eBay, Airbnb and Vinted, those online marketplaces will now share your income with HRMC.
The change comes into effect from January 1st, 2024, and requires websites and apps to report the income of sellers who make more than 30 transactions or an income of £1,735 (€2,000) in a year. And it applies to handcrafted products, second-hand items, and services including taxi hire, food delivery, short-term rentals, and freelance work. Reporting will be due by January 2025.
In the past, HMRC was able to request information, but it will now be supplied by digital platforms under new rules introduced as part of the UK signing up to the Organisation for Economic Cooperation and Development (OECD). And information will be shared between countries that have signed up to the OECD tax rules.
How this could impact your tax bill
As an individual in the UK, you can get up to earn up to £1,000 each year as a tax-free trading allowance from self-employment, or from property. If you have both types of income, you’ll get a £1,000 allowance for each, calculated as your gross trading income before any expenses.
Even if your income falls under these amounts, you may still need to register for Self Assessment and complete a tax return for various reasons, including claiming relief on losses, voluntarily paying Class 2 National Insurance, or receiving Tax Free Childcare or Maternity Allowance.
But even if you’re not intending to file your taxes, it’s important to keep records of all your online earnings in case they’re required by HMRC. Examples include invoices, receipts and statements, and you can find more details on tax-free allowances via Gov.uk.
And if you’re potentially making an income or profit approaching the threshold, it’s worth contacting HMRC or speaking to an accountant in advance, rather than waiting to find out you may need to pay tax, especially as you could incur a penalty.
For most people, even if your income amounts to more than £1,000, any tax liability is likely to be relatively small, especially as you can still use that amount for ‘partial relief’ against your tax bill.
So the change is likely to impact a small number of individuals and sole traders who either should have already been reporting their income to HMRC, or tip over the £1,735 threshold in the future without realising the implications.
If you have any questions about your income and tax status, it’s worth speaking to a specialist financial advisor or accountant. IPSE members get access to tax and legal helplines as just one of the benefits designed to support the self-employed in the UK.