The way the UK tax system operates could cause confusion as HMRC pushes to reveal details of how much people earn selling goods and services online as a 'side hustle' A charity has warned that
Sites such as eBay, Vinted and Airbnb have until the end of this month to report to HMRC how much some of their users will earn in 2024, details that could lead to sellers paying more tax.
However, the charity warned that people could record incorrect details on their tax returns, as the UK tax year spans a different period to the details reported to HMRC. The charity Low Income Tax Reform Group (LITRG) said more people will now have to file tax returns, but they may have access to information that is difficult to manage. The new effort to find out how much people are making online is an international effort by the Organization for Economic Co-operation and Development (OECD), with reporting dates from January to December.
The UK tax year is April to April, so the figures each platform submits to HMRC will cover different periods. LITRG says it is concerned about online traders using incorrect numbers on their tax returns.
Meredith McCammond, head of technology at LITRG, said only a quarter of the tax data people will receive between January and March 2024 will be relevant to people filling out their tax returns this month. said. She says this comes at HMRC's busiest time of the year, so it may be difficult for many people preparing a tax return for the first time to get help.
Under the new guidance, platforms will have to notify HMRC if someone earns more than £1,700 a year or completes 30 transactions. There are no new taxes, but more people may have to pay taxes because they may not have previously declared their income. Under UK law, everyone can receive a trading allowance in each tax year. This means you can earn up to £1,000 without paying tax. Accountancy firm BDO's Dawn Register said the date discrepancy meant HMRC was unable to obtain accurate data. “However, it is sufficient to identify whether an individual is conducting transactions and, if the trading volume is high, to initiate a tax investigation,” she says.
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“The new rules could mean some nasty surprises are in store for people who don’t know the rules or try to get away with not paying tax on their trading profits. HMRC may be surprised when they see how much they are making on online platforms.”
An HMRC spokesperson said if someone was selling unwanted items lying around the house, they wouldn't have to pay tax. But if they make a trade or profit from a sale, they could be held liable. “For people selling personal property online, nothing has changed at all. If you are not trading and only sell unwanted items online from time to time, you will not pay tax. ”
The data provided is divided into three-month quarters for ease of use by sellers. When the new process began a year ago, people feared they would have to pay tax on everything they sold, prompting HMRC to clarify the issue. Myrna Constantine from accountants RSM UK said: “The lack of guidance left people scared and confusion ensued as they thought HMRC would come and tax the extra cash they made by selling unwanted Christmas presents.” he said. “HMRC is now supporting individuals to decide whether they need to declare income they earn from selling personal property, goods or services online or renting property using digital platforms. We have issued detailed guidance.
