What HMRC digital platform reporting rules mean for online sellers

What HMRC digital platform reporting rules mean for online sellers

Are you an online seller?

HMRC has introduced new rules that affect anyone who sells items on sites such as eBay, Vinted, Etsy or Depop or people who rent out their homes on Airbnb and other similar sites.

If you’re a delivery driver for the likes of Deliveroo or UberEats, for example, or you sell your freelance services through a website and earn money from doing so, you’ll also come under the new regulations.

In this article, you’ll learn who will be affected by the new rules, what they mean in practice, what information about your trading will be sent to HMRC, and where to get help and advice.

Here’s what we cover:

Data sharing between HMRC and digital platforms

Even before these new regulations came into force on 1 January 2024, HMRC was able to request your information if you sold products or services via a UK-based online platforms when necessary.

However, this was previously on a case-by-case basis and this data sharing between digital platforms and the tax authorities is now automatic.

And it’s worth noting that it also covers international platforms.

The change has come about because the UK government has signed up to rules pioneered by the Organisation for Economic Co-operation and Development (OECD), which are intended to tackle tax evasion and the underpayment of tax in countries around the world.

Here in the UK, the tax authorities will use the data it receives due to these new rules and cross-reference it with other records it holds about you and your business to ensure that you’re reporting your income accurately.

According to HMRC: “A consistent, standardised international approach to provision of information will also be better for platforms as it is designed to prevent a patchwork of domestic reporting requirements.

“The rules will also make it easier for sellers on these platforms to comply and will help HMRC to detect and tackle tax evasion when they do not.”

What is a digital platform for the purposes of the new rules?

HMRC regards relevant digital platforms as websites, online marketplaces, and apps that allow people and companies to sell products and services to other individuals and companies.

However, websites, apps or other software run by a business that are exclusively used to sell that business’s own goods or services don’t count as platforms because they don’t connect third-party sellers with users.

You might be using eBay, Etsy, Vinted or other online marketplaces to sell items that you’ve bought elsewhere or made yourself.

A digital platform in this context also includes UberEats, Deliveroo, Just Eat or any other food delivery network.

Similarly, if you’re renting out a property on Airbnb, Booking.com or Vrbo or your driveway, garage or parking space is available for hire via a digital platform then you may also come under the new rules.

The legislation in the UK will apply to any digital platform that is resident for tax purposes in the UK.

Such platforms will be required to report specific data in relation to the sellers using that platform, regardless of whether those sellers are UK taxpayers or not, to HMRC who can then share this data with other tax authorities where relevant.

Likewise, tax authorities in other countries who are also implementing the OECD rules, who obtain data about sellers who are UK taxpayers will share this data with HMRC.

What are the new digital platform reporting rules?

Essentially, HMRC will have more data available to ensure that any UK taxpayer (not just those running a side hustle) with an income from a digital platform is declaring the correct amount of income.

The digital platforms will have to start collecting information about many more sellers than is currently the case.

But they won’t have to begin reporting this information to the authorities until 31 January 2025, to cover the 2024 calendar year.

The data that’s collected by the digital platforms can be used by HMRC to check what you’ve submitted via Self Assessment.

If you’re already paying the correct amount of tax on the sales that you make through digital platforms you won’t have to do anything beyond what you’re currently doing.

The changes don’t affect what is known as the trading allowance.

Also called the trading and miscellaneous income allowance and currently set at £1,000 per tax year, this is the amount you can earn from trading or from casual and miscellaneous activities before you have to pay income tax and National Insurance.

Individuals also enjoy a £1,000 tax-free allowance for money made through property.

What information will be passed to HMRC?

Websites and digital platforms now have to forward to the tax authorities the names, addresses, dates of birth, National Insurance numbers and taxpayer identification numbers, of individuals as well as their earnings and the fees that they’ve paid.

With business sellers, this data also includes business registration numbers.

If you’ve rented out a property via Airbnb, or any of its competitors, the site will now have to share the address of the property.

Digital platforms will also have to pass on data such as sellers’ bank account details for the accounts that the income was paid into.

They will be required to keep a copy of any data that they send to HMRC about you.

Under the new rules, the digital platforms, will have to provide sellers with the same data that they send to HMRC – this will help sellers to get their tax correct.

It’s important to note that they will report their data across calendar quarters (think January to March, April to June, etc) based on a calendar year, in other words from 1 January to 31 December.

Meanwhile, if you submit a Self Assessment tax return, you’ll report your income and expenses on a tax year basis, that is 6 April to 5 April of the following year.

So there’s still a question around how HMRC can and will use this data to cross check tax returns.

Who will be impacted?

These new rules will affect digital platforms resident for tax purposes in the UK and the UK taxpaying businesses and individuals who sell products and services through them.

As part of the government support for the OECD proposals mentioned above, there’s an international dimension too – the tax authorities will share the information that it collects with the other participating tax authorities for the jurisdictions where the sellers are resident for tax purposes.

The new system could land you with an unexpected tax bill if you’ve been underreporting income on your tax return from these platforms.

However, there is an “occasional” seller exclusion.

This applies if the platform you use facilitates fewer than 30 sales for you, and you receive less than €2,000 (approximately £1,700) during the financial reporting period.

In this scenario, the platform would not be required to report your data to HMRC.

Adam Jay, CEO of Vinted, told the BBC that it would be “quite a small proportion of users of our platform who will trigger this [payment] threshold”.

However, it’s better, of course, to be safe than sorry and therefore check your records carefully to see whether you’re an “occasional” seller.

Do you need to inform HMRC and pay tax?

Providing you’re already declaring any income earned through a trade on an online marketplace on your tax return then you shouldn’t have to do anything different.

If you have income from an online marketplace which you’re not already declaring then you should consider whether this income needs to be disclosed and if so whether you need to register for Self Assessment.

A key point to remember here is that you would only pay income tax on income from an online market place if that income was earned through a ‘trade’.

So if you made some money selling unwanted belongings through Vinted for example, its unlikely that you would need to register for Self Assessment or pay tax on this income, even if it was more than £1,000.

However, if you were buying goods purposefully to resell on Vinted then this may well constitute a trade.

The digital platforms themselves have been obliged to start collecting this information in accordance with the new regulations from 1 January 2024.

Going forward, this information must be sent to HMRC by the platforms by 31 January following the end of the reporting period.

This means that reports for the period of 1 January to 31 December 2024 will be due by 31 January 2025 for UK digital platforms.

Who to turn to for help with the new digital platform regulations

If you’re at all unsure about whether you’re affected by these rules, or you have any questions about your tax position, it’s worth getting professional advice.

Your accountant, if you have one, should be your first port of call.

And if you have a tax advisor, they should also be able to tell you whether you’ll be affected and, if so, what you should do.

If you don’t have a professional advisor then the HMRC website is a good first port of call.

You can also check whether you need to file a Self Assessment tax return on the government website.

If you’re still unsure, then you can try the government’s Self Assessment helpline on 0300 200 3310.

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Final thoughts on the new digital platform rules

The new regulations will probably have little or no effect on you if, for instance, you just sell off the occasional unwanted item, as this makes you an “occasional” seller.

However, even if you don’t consider yourself to be a frequent trader on a platform, it’s still possible that by selling a few bits and pieces on a regular basis or by renting out a property from time to time, over the year you’ll hit the £1,000 threshold of the trading allowance – after all, that only amounts to £84 a month.

Keeping an accurate, up-to-date note of what you’ve sold, when you sold it and how much profit you made with each sale is sensible.

Don’t forget as well as to record any expenses such as platform fees and postage and packing – if you do find yourself liable for tax then you can set these off against your profits.

As always with money matters, taking a moment to maintain accurate records and keeping an eye out for changes in the tax regulations can help you avoid unnecessary costs, stress and inconvenience in the longer run.

It’s worth re-iterating the fact that these rules from HMRC don’t change how much tax you owe if you’re an online seller. It’s not about taxing you more.

Instead, it’s about transparency of information to ensure you and other online sellers pay the correct amount of tax.

Remember, if you end up paying more tax due to these new rules, it’s likely you weren’t declaring all of your income.

And if you’re having a clear out and selling some unwanted goods on an online marketplace, the new digital reporting rules likely won’t apply to you as this doesn’t constitute a trade.

If you need support with this, speak to an accountant or a tax advisor. And you can also contact HMRC if you have any questions, too.

FAQs on the digital platform reporting rules

What is an occasional seller?

Someone who makes fewer than 30 sales or receives less than €2,000 (approximately £1,700) from a platform during the financial reporting period.

In this scenario, the platform would not be required to report your data to HMRC.

However, chances are that such sellers wouldn’t be carrying out a ‘trade’ anyway, meaning the income earned wouldn’t be subject to income tax in the UK.

If I sell second-hand goods on Vinted or Depop, do I have to start paying more tax?

No. These rules don’t change how much tax you owe but if you earn income via an online platform that you currently don’t pay tax on then you should consider if you should be because the new rules will mean HMRC may have more transparency over your income.

Remember that you would only pay income tax on income from an online marketplace if that income was earned through a ‘trade’.

So if you made some money selling unwanted belongings through Vinted for example, its unlikely that you would need to register for Self Assessment or pay tax on this income, even if it was more than £1,000.

However, if you were buying goods purposefully to resell on Vinted then this may well constitute a trade.

I want to start buying vintage goods from eBay and make an income by reselling them on various online marketplaces. Will these new rules apply to me?

Assuming you are not classed as an occasional seller then yes, the online marketplaces will be required to report your income to HMRC.

In this scenario, you would likely be classed as a ‘trader’ and should register for Self Assessment to ensure your income is declared and appropriately taxed.

When do digital platforms need to start sending information about online sellers to HMRC?

The new regulations came into effect on 1 January 2024.

Digital platforms have until 31 January 2025 to report this information to the tax authorities, to cover the 2024 calendar year.

I sell products via my website. Do HMRC’s digital platform rules apply to me?

No. They only apply to digital platforms that allow people and companies to sell products and services to other individuals and companies.

Examples include eBay, Depop and Etsy.

Do the digital platform rules only apply to people running side hustles?

No. HMRC will have access to more data to make sure that any UK taxpayer – not just side hustlers – generating income from digital platforms is declaring the right amount of income.

Has HMRC introduced a new tax for online sellers to pay?

No. It’s introduced new rules for digital platforms to adhere to, where they’re moving away from sharing sales data about online sellers on a case-by-case basis to doing so automatically – and for everyone.

There is no change to how much tax an online seller should be paying.