Do you sell your clothes, services or anything else online? HMRC will know about it…

From the 1st January 2024, online platforms which connect sellers or service providers to consumers such as eBay, Vinted, Air BnB, Uber and many others are required to collect data on your income from their websites and apps. This information will be automatically shared with HMRC by 31st January 2025 and any income from these sites which isn’t declared to HMRC may be investigated. This information is used to combat tax evasion and may also be shared between tax authorities in other countries.

So, is this another tax?

Not quite. The tax laws haven’t changed. The tax-free allowance on property and trading is still £1,000, which lets you earn up to this sum without needing to declare it to HMRC. Once you reach this threshold, you need to report your earnings and register for Self-Assessment.

This tax-free allowance is for gross income which is before expenses and deductions are accounted for - after that, the income is taxed. You may choose to claim to deduct your expenses instead of claiming for the tax-free allowance on property or trading if they are greater than £1,000 in total.

So do you need to pay tax on selling everything?

Well, that depends. Many people sell products or services online for the sole purpose of turning a profit. Examples include persons purchasing clothes from charity shops and selling them at a higher price online, or somebody who upcycles old furniture and sells it on for a profit. These people are classed as ‘traders’ and their business approach to the online marketplaces would mean they are likely to need to pay tax on their income.

However, many people will use these websites or apps to sell their own personal possessions, rather than discarding or giving them away. This may be done periodically throughout the year, or as a one-off large clear-out of the attic or garage. If these personal goods were sold at a value less than their original value, then it is likely that it does not need to be declared. Even if a profit were made, in this case the person would not be classed as a trader and so the profit would be classed as capital gains. Money arising from capital gains has a tax-free allowance of £6,000 and so any profits greater than this value would need to be reported and paid for.

Tax laws can be complicated, so if you are unsure about any part of it get in touch with us at GY Finance Ltd and we can guide you through your tax concerns and assist you in completing tax returns.

If you are due to complete a Self-Assessment tax return, the deadline for the 2022/2023 tax year is 11.59pm on Wednesday 31 January 2024.