Digital platforms including eBay and Vinted are now obliged to collect and share details of transactions with the UK tax authorities.
There’s been a lot of confusion online about what this means for ordinary sellers, with some worried that it would land them with tax bills for listing their children’s old clothes.
So what do the changes mean for buyers and sellers – and will you have to declare tax?
FactCheck takes a look.
What are the changes?
Although HM Revenue & Customs (HMRC) was already able to request information from UK-based online operators, the new rules now require digital platforms to report the income that sellers are getting through their site routinely.
The new rules will apply to sales of goods such as handcrafted products and second hand clothes, as well as services including taxi hire, food delivery and short-term accommodation lets.
How much can you make on Vinted, eBay and other secondhand sites without being taxed?
Individuals have an annual £1,000 tax-free allowance for “trading” income, for example if you are selling new or second-hand items online. That means you can earn up to the threshold without paying income tax or National Insurance.
But Victoria Todd, head of the Low Incomes Tax Reform Group, points out that “people selling unwanted personal items such as their children’s old clothes or toys are not likely to be ‘trading’”, so even if it is a significant amount “any money they make is generally not taxable”.
She added: “The new rules have caused a great deal of confusion, but they simply mean that HMRC are receiving more information from online platforms than they were before. If you are following existing rules and declaring your income as required, then you don’t need to worry or do anything differently.”
Andy Gibbs, director of services at TaxAssist Accountants, told FactCheck: “To determine whether you have anything to report, you need to decide if you have a trade. This is established by looking at what HMRC terms the badges of trade and you must consider things like the volume of transactions and the way you carry out the activity.”
The HMRC guidance on selling online and paying taxes explains that if, for example, you are just selling unwanted items that have been lying around your home, such as the contents of a loft or garage, “it is unlikely that you will have to pay tax”.
But if you buy goods for resale, or make goods with the intention of selling them for a profit, “then you are likely to be trading and will have to pay tax on your profits”.
A spokesperson from Vinted told FactCheck: “We’ll only need to share information if people make 30 or more transactions on Vinted, or who make more than €2000 (£1,735) on Vinted during the year. This will only apply to a small percentage of Vinted members.”
An eBay spokesperson told FactCheck: “In light of HMRC’s new tax reporting rules, eBay is working closely with our sellers to educate them on the changes, which won’t affect their existing tax obligations.”
HMRC said in a statement: “These new rules will support our work to help online sellers get their tax right first time. They will also help us detect any deliberate non-compliance, ensuring a level playing field for all taxpayers.”
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Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
