As the dependency on internet has grown, the tendency of people earning their livelihood through online trading of goods and services have also gone up. Considering this rapidly changing and increasing mode of trading, the HMRC has now imposed a new rule on the digital platforms.
From 1st January 2024, digital platforms must make annual reports to HMRC about the sellers selling goods or services through them. The tax rules for online selling haven’t changed, this rule just means that the HMRC will have more information of online selling activities.
What is a digital platform?
Any website or app that aids in transactions between sellers and their customers is a digital platform. Some of the widely used platforms are eBay, Etsy, Vinted, Airbnb, TikTok, Instagram etc.
Although HMRC had the power to ask platforms for information, this rule has now enabled HMRC to receive an annual report from these platforms without being asked.
As these rules are part of a global initiative from the OECD (Organization for Economic Co-operation and Development) – a group of countries who collaborate to develop policy ideas, HMRC won’t just have data from UK platforms, but also from the platforms overseas. It means that even if you’re selling or renting on a non-UK platform, HMRC can still receive this information. HMRC will also share the received details about non-UK residents to their tax authorities.
Who is affected?
The following are affected
- Those who deal with property/vehicle rental, food delivery or other personal services
- Those who deal with selling of goods via digital platforms and content creation
The sellers must be under the following threshold to be exempt.
- earning no more than £1000 in a year – this includes gifts & services received from promoting products online.
If you sell a single item for more that £6,000, you may need to pay Capital Gains Tax even if you are exempt from the above.
Platforms that simply provides adverts (like Gumtree, spare rooms etc) but are not involved in the selling procedure, are exempt as well.
What will be reported?
The rule came in from 01st January 2024 & the first report was filed January 2025.
The report includes:
- Identifying information (name, address, date of birth etc.) of sellers
- How much they’ve earned
- Bank Account numbers/Sort codes
- For letting property – details of the property
The platforms are also required to share a copy of the report with the sellers.
What should you do?
- Determine if your transactions count as trade
- If they do, keep record of all related costs & incomes
- Contact NPUS Accountants to take care of your self-assessment
- Register for Self-Assessment (NPUS can do this for you & structure it)
- File your self-assessment via NPUS (if your total income is above £1000- from online selling) to avoid incurring additional interests and penalties.
For further details, please feel free to contact us.
0203 4688 788 info@npus.co.uk
You can also check the official publications for your reference: Selling online and paying taxes – information sheet – guidance from HMRC
