Navigating the New Era of Tax Transparency:
If you're an eBay, Vinted, Etsy seller or earning extra income through platforms like Deliveroo, Uber or AirBnB important changes in tax regulations demand your attention. Starting from January 1st, digital platforms are now required to collect additional information about sellers, such as the number of sales and total income generated. This data will be automatically shared with HM Revenue & Customs (HMRC) by January 31, 2025, covering the 2024 calendar year. These changes are part of the UK's commitment to global efforts, led by the International Organization for Economic Cooperation and Development, to combat tax evasion.
Key Changes and Implications:
1. Automatic Data Sharing:
o Previously, HMRC could access seller information upon request. Now, automatic data-sharing processes, encompassing both UK and overseas platforms, have been implemented for greater tax transparency.
2. Thresholds for Data Sharing:
o Sellers will only have their information automatically shared if they sell 30 or more items a year or earn over £1700. If you fall below these thresholds, your data won't be automatically shared, but you may still be liable for taxes if your earnings exceed £1000.
3. Expanded Scope:
o The new rules extend beyond goods sales to include anyone providing services, renting out properties, or using digital platforms for income. This encompasses activities such as food delivery, childcare, and various freelance services.
4. Definition of Digital Platforms:
o Digital platforms, as per the new rules, include "apps, websites, or other types of software connecting sellers to consumers of their goods and services." This broad definition encompasses a wide range of popular sites and apps.
5. Global Data Sharing:
o The changes enable HMRC to share data with tax authorities in other countries, fostering international cooperation to combat tax evasion. If you earn money on a platform based in another country, that country's tax authorities may share information with HMRC.
Understanding Tax Obligations:
1. Trading Allowance:
o If your total earnings across all platforms in a tax year are £1,000 or less, you're likely covered by the 'trading allowance,' allowing you to earn this amount tax-free without reporting it to HMRC.
2. Above £1,000 Earnings:
o If your total earnings surpass £1,000, you may need to inform HMRC. The nature of the income determines whether you should declare it through self-assessment.
3. Trading Activities:
o If your earnings come solely from selling goods online, you must consider whether you qualify as a trader and declare income through self-assessment. The distinction between selling personal items and trading can be nuanced.
4. Property Rental and Services:
o If your earnings involve renting out property, providing services, or a combination of activities, a self-assessment tax return is generally required.
While these changes do not introduce new taxes, they enhance HMRC's visibility into income earned through digital platforms. Sellers are encouraged to review their activities, stay informed about tax obligations, and assess whether adjustments are needed to ensure compliance in this era of increased financial transparency.