Sell on eBay, Etsy or Vinted or rent your home on Airbnb? Firms will now report your earnings to HMRC – so check if you need to pay tax
If you sell goods online on sites such as eBay, Etsy or Vinted, rent out your home on Airbnb, or earn extra income from providing services via platforms including Deliveroo or Uber, then these firms will soon start passing on information about you to HM Revenue & Customs (HMRC). This means it's vital to check if you need to declare your income through self-assessment and possibly pay tax on it.
Starting on Monday 1 January, so-called "digital platforms" now have to collect extra information about sellers, including – crucially – how many sales they've made and how much income they've generated.
The platforms will have to start automatically sharing this information with HMRC by 31 January 2025 – the first lot of data-sharing will cover the current 2024 calendar year, which is why it's worth getting on top of it now.
Previously, HMRC was able to access sellers' information from UK-based online platforms when required. The new, automatic data-sharing process, which also covers overseas platforms, is being implemented after the UK signed up to rules by the international Organisation for Economic Co-operation and Development, which aim to tackle tax evasion globally.
Your information WON'T be automatically shared if you only sell a small number of goods
If all you're doing is selling goods online, firms will ONLY pass on data to HMRC automatically if you're selling 30 or more items a year OR have total earnings over the equivalent of €2,000 (currently around £1,700) (a) – so if you're doing a lot less than that, it isn't an issue. However, it's worth noting you may still have to pay tax if you earn more than £1,000 from selling.
Sites and apps will also have to share information on anyone who provides services (such as food delivery, childcare, plumbing and so on), or rents out property or a vehicle.
Under the new rules, a digital platform is any "app, website or other type of software that connects sellers to the consumers of their goods and services", according to accounting firm PWC – meaning lots of popular sites and apps are covered.
However, the new measures DON'T apply to cashback sites, such as Quidco and Topcashback, as cashback is not taxable.
This isn't a new tax – but it does give HMRC more visibility over your income
It's important to note that the rules around who pays tax on earnings made from digital platforms have NOT changed. If you didn't owe any tax on these earnings before, and you continue to use these platforms the same way, you won't have to start paying tax on them now.
What has changed is that HMRC will be able to find out what people are making on digital platforms more easily, so now is a good time to check if you owe tax or if you may do so for future earnings.
The change also means that HMRC can share this data with tax authorities in other countries that are signed up to the new rules, and vice versa. So if you are living in the UK and making money on a platform that's based in another country, the tax authority in that country will be able to let HMRC know about this. It's not clear yet which countries are signed up, though it's expected to include most EU member states.
If the total amount you earn via a platform in a tax year is £1,000 OR LESS, you probably don't need to tell HMRC or pay any extra tax
This is because you're likely covered by what's known as the 'trading allowance'. This entitles you to earn up to £1,000 tax-free without having to report the income to HMRC or pay any income tax on it.
Note that what counts here is the income before any platform fees are taken off – NOT what you end up with in your bank account. As the Low Incomes Tax Reform Group points out, this can sometimes make it tricky to work out whether your income is above or below the threshold – if in doubt, particularly if you're close to the limit, contact HMRC's income tax helpline.
If the total amount you earn via a platform in a tax year is £1,000 or ABOVE, you LIKELY need to tell HMRC and MAY have to pay tax on this
It all depends on how you made this money – note that the limit applies to your overall earnings across all platforms...
- If the earnings were solely from selling goods online, the key question is whether or not you're considered to be "trading". In a nutshell, if you make or buy goods with the intention of selling them, you're probably a trader – and you therefore need to declare your income to HMRC through self-assessment.
For example, if you're buying furniture, decorating it and selling it on for more than you bought it for, this would be considered trading (unless it was a one-off). But if you cleared old stuff out of your attic and sold it, you wouldn't be trading.
There are some grey areas, however – you can check HMRC's online guide to work out if you need to tell it about income made from online sales.
Separately, if you've made a gain by selling certain high-value items you own for £6,000 or more each – for example, jewellery, paintings, antiques, coins or stamps, or sets of goods such as matching vases – you may have to report this to HMRC and pay capital gains tax. But you won't pay capital gains tax on top of any income tax – it's one or the other.
- If the earnings were from renting out property, providing services or a combination of different activities, in most cases you need to declare this by submitting a self-assessment tax return. You can check if you need to tell HMRC about additional income using this Gov.uk tool.
Renting out part of your home to a lodger? You may be able to earn up to £7,500 tax-free under the 'rent a room' scheme.
Think you might have tax to pay on your additional income? Tell HMRC as soon as possible
If you think you owe tax, you should file a self-assessment tax return as soon as possible by going to Gov.uk. The deadline for the 2022/2023 tax year is 11.59pm on Wednesday 31 January – see our news story on the self-assessment deadline for more information.
It's worth noting that even if you have to submit through self-assessment, this doesn't necessarily mean that you'll owe any tax, depending on what allowances you're entitled to.
If you don't think you owe any tax, you don't need to do anything. If a digital platform you use passes your information on to HMRC, it will also send a copy to you – you can use this to double-check your earnings and make sure you definitely don't need to file a self-assessment tax return.
(a) An earlier version of this article incorrectly stated you had to meet both criteria for your info to be passed on. After we double-checked this with HMRC, it has confirmed it is EITHER one. Return to top.