Online sellers on platforms such as eBay, Vinted, and Etsy have been cautioned about potential tax implications due to new rule changes set to take effect in January. A tax charity raised concerns about the lack of awareness among sellers regarding the forthcoming changes, describing it as a ‘ticking time-bomb’. At present, there is a trading allowance of £1,000, beyond which earnings may become taxable for those considered professional traders. From January onwards, sellers surpassing this threshold annually will be required to submit a tax return to ascertain if their income is subject to taxation.
The Low Income Tax Reform Group (LTRG) criticised HMRC for inadequate communication regarding the obligation for online sellers to file tax returns. The ambiguity surrounds the required data and its timing. Starting in 2025, online platforms will share sales and transaction reports with users and HMRC. However, the LTRG argues that reporting data based on calendar years instead of fiscal years will complicate matters unnecessarily. The new international regulations mandate online platforms to collect information on individuals offering accommodation, transport, services, or goods if they earn €2,000 or more and complete 30 transactions within a calendar year. As the UK has agreed to comply with these regulations, online platforms must obtain specific seller details, including bank account information, to report earnings to tax authorities.
The LITRG urged the government and HMRC to clarify tax return rules and mandate online platforms to present information to sellers in a straightforward format to ensure understanding of what data to provide to tax authorities. The organisation highlighted the challenges faced by individuals in the gig economy, particularly young, migrant workers with limited tax system experience and resources for professional tax advice. HMRC acknowledged the importance of educating online sellers on their tax obligations and reminded sellers to review if they need to file a tax return through their Self Assessment campaign.
When the rule changes were announced, some sellers misconstrued them as the introduction of a new tax, while in reality, only reporting rules had been amended. HMRC emphasised their efforts in providing guidance and promoting awareness for online sellers. As sellers navigate these upcoming changes, clarifications and support from authorities prove vital in ensuring compliance and understanding among online sellers facing potentially complicated tax obligations.