People who boost their income through online trading are being warned of a new crackdown by HMRC.
Internet-based marketplaces such as Vinted, Depop and Etsy along with longer established sites such as eBay and Amazon are growing in popularity, and many are now using them regularly as a “side hustle” to earn extra cash.
Until now this extra income may have slipped under the radar but from 1st January, HMRC is forcing seller platforms to report data on sellers’ earnings or risk a hefty fine.
And if anyone earns more than £1,000 through their online trading in a tax year, they need to be registered as self-employed.
“Many people make good use of online marketplaces to de-clutter or pursue a hobby and the extra cash is a welcome bonus.But more and more of us are using them as a secondary income source or even a main occupation providing regular extra income that is taxable. HMRC is now catching up on these individuals as well as the online companies and individuals should take advice on how these new regulations could affect them.”
As well as buying and selling items, the crackdown extends to other online income sources such as renting a property on Airbnb or similar sites, hiring out your car parking space or becoming an influencer on YouTube, Instagram, or TikTok which could generate cash from the platform or generate gifts from companies seeking a mention.
Sellers will soon start receiving copies of details that the platform supplies to HMRC. These should function as a reminder to check whether registration as self-employed is required. Ultimately, anyone with a total income of more than £12,570 a year needs to pay tax.
Significantly, there is nothing to stop the tax authorities backdating any investigation into a seller’s activities which could mean large bills and fines for some people, depending on how long they have failed to declare their income.
“It is a potential minefield as many people will have traded for some time without thinking about the tax implications. The safest way of avoiding a penalty is to take advice from a tax professional. We can look after the administration such as registering as self-employed while you continue to enjoy your business without falling foul of the law.”