New tax assessment on side hustles like eBay and Vinted risk confusion in different reporting periods
HM Revenue & Customs is increasing its scrutiny of “chaotic” profits, requiring online platforms such as eBay, Vinted and Airbnb to submit information on user income for 2024 by the end of this month.
However, concerns have been raised that the difference between the UK tax year (April to April) and the OECD reporting period (January to December) could lead many regular traders to make mistakes in their tax returns.
The Low Incomes Tax Reforms Group (LITRG) warns that people may inadvertently provide incorrect figures to HMRC because the data they receive covers the calendar year, not the tax year. For example, only income from January to March 2024 can be useful for self-assessment for this month, however the total amount submitted by online forums covers all 12 months of 2024.
“Only one quarter of the data people will get is relevant to current tax returns,” said Meredith McCammond, chief technology officer at LITRG. “That can lead to confusion, especially for first-time applicants who need help at HMRC’s busiest times.”
Under the new guidance, any user of the platform who earns more than £1,700 or holds 30 jobs a year will be notified to have their information passed on to HMRC. Although this is not a new tax, it may lead to tax charges for people who were previously unaware that they needed to declare online sales. Accountancy firm BDO’s Dawn Register notes that, despite the incomplete data, HMRC will still have enough information to launch an investigation if a trader’s profits appear to be high.
“These new laws may mean that there are bad surprises for people who do not know anything about the existing law or who have not said anything about their income,” said Register. At the same time, HMRC would be surprised at how much money regular traders make online.
Many regular traders and “declutterers” will be protected by UK trading capital, which allows individuals to earn up to £1,000 a year from occasional trading without paying tax. A spokesman for HMRC stressed that “nothing has changed” for people selling unwanted personal items. The new focus is on those who are doing consistent trading or profiting from sales.
Miruna Constantin of RSM UK recalls that, when the procedures were introduced last year, public concern grew: “There was an uproar when people thought that HMRC might not pay tax on all the extra money they made selling unwanted Christmas presents. HMRC have provided us with detailed guidance.”
Effective steps for sellers
The new data, which is scheduled to be reported in quarterly blocks, should help retailers match field statements more closely with their tax obligations. But for a smooth process, experts advise to pay more attention:
• dates: Find out which quarter applies to your current self-assessment period (January to March 2024 for the 2023-24 tax year).
• allowances: Remember that the first £1,000 of trading income is usually tax-free, and different capital gains rules may apply if you make a profit from selling valuables.
• when in doubt, ask: When in doubt, seeking advice from HMRC or a tax professional can help avoid costly mistakes or investigations.
With this expanded reporting, the government hopes to reduce hidden or accidental non-compliance. However, until sellers feel confident about how and when to use the numbers on eBay, Vinted, and other platforms, the risk of “surprise surprises” remains.
