Factchecking the ‘side hustle’ tax
It was recently announced that from the 1st January 2024, digital platforms such as Vinted, eBay and Airbnb would be obliged to collect and share transaction details from users with HMRC. This has ultimately led to a great deal of confusion amongst sellers who worried that they could be taxed for selling their old items on these platforms.
However, despite what you may have read online, this is not exactly the case. So how do you sort the fact from fiction? Never fear, the experts at Ellis & Co are here! Let’s identify precisely how these new rules will impact both individuals and business owners.
What changes have been made?
HMRC was already able to request information on a seller’s income at any time; these changes mean that UK-based online operators are now required to routinely report this information directly (although they are not required to submit their first report until January 2025).
This comes as a result of the UK’s membership with the international body, the Organisation for Economic Cooperation and Development (OECD) that is working to clamp down on tax dodgers on a global scale.
What do the new rules apply to?
Rules will apply to the sale of goods and services such as:
- Second hand clothes
- Handcrafted products
- Food delivery
- Short-term accommodation lets
- Taxi hire
Sellers earning below the tax-free threshold of £1,000 will not be required to complete a tax return, however it has been advised that records should be kept in case these are requested further down the line.
Whilst this may sound worrying, it is unlikely that individuals simply selling unwanted items will be required to pay tax; however, those buying or making goods with the purpose of reselling will likely be classed as ‘trading’ and therefore will be required to pay the appropriate tax (if reselling above the £1k threshold).
A Vinted spokesperson has said:
“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.”
And HMRC has commented 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.”
If you are unsure of how these new rules will impact your tax position as a business owner, please don’t hesitate to contact the Ellis team today!