New rules came into force at the start of this year that require digital platforms such as Airbnb, Vinted and eBay to routinely report the income their sellers are making.
The UK has signed up to new guidelines from the internal body, the Organisation for Economic Cooperation and Development (OECD). The rules are part of a global directive to clamp down on tax evasion and require online selling platforms to collect and report seller information and income to HM Revenue & Customs (HMRC) by January 2025.
The introduction of these new reporting requirements will enable HMRC to more easily correlate data from online sales with tax returns and identify cases where returns have not been made.
Paying tax when selling goods or services online
Taxpayers should be mindful of the new rules and ensure they are accurately recording all of their earnings, not just those from their primary income source.
If the total income from trading or providing services online is less than £1,000 (before deducting expenses) in any tax year, there is no requirement to inform or pay any tax on the profits.
In order to pay tax on goods or services sold online, you either have to be trading or making a capital gain. Capital Gains Tax (CGT) applies if a profit is made when you sell a personal possession for £6,000 or more. Further details on CGT can be found here.
Rent a Room Scheme
The Rent a Room Scheme may be applicable to taxpayers using Airbnb, enabling them to earn up to a threshold of £7,500 per year tax-free. The scheme is applicable to occupiers and tenants that provide furnished accommodation in their only or main home.
How M+A Partners can help
It is important to pre-empt any action HMRC may take as a result of the more comprehensive reporting requirements required from online sellers. If you think you may need to complete a self-assessment tax return or are unsure of your tax position, please get in touch with your usual M+A Partners contact or email us at enquiries@mapartners.co.uk.