Online Sellers Face Stricter Taxes

From January 1, stricter tax rules for online “side hustles” require platforms to share transaction details globally

Mia Brown

People engaging in online “side hustle” activities are set to face stricter tax regulations starting January 1. Companies such as Vinted, Airbnb, and eBay are now required to collect and share transaction details with tax authorities, enabling HMRC (Her Majesty’s Revenue and Customs) to monitor unreported income. This move aligns with international efforts, coordinated by the Organisation for Economic Cooperation and Development (OECD), to combat tax evasion globally. The new rules mandate digital platforms to routinely report income derived from sales of goods and services, affecting a range of activities from selling handcrafted items to offering freelance services and short-term accommodation rentals.

The UK government believes these rules will enhance efforts to combat tax evasion, treating online sellers more akin to traditional businesses. The data-sharing mechanism will extend to countries that have adopted the OECD tax rules. Companies like Vinted assure that the impact will be minimal for most users, as only sellers reaching specific thresholds in terms of transaction volume and income will trigger reporting requirements. However, experts warn that the new rules might discourage individuals engaged in occasional online sales or craft hobbies due to potential tax implications.

For individuals already paying tax, there’s no need to alter current practices. There are tax-free allowances, such as £1,000 for property-related income and another £1,000 for “trading” income, covering activities like online selling. Individuals earning below these thresholds may not have to file a tax return but are advised to maintain records. While companies are obligated to report seller information to HMRC by January 2025, sellers with fewer than 30 transactions or earning less than €2,000 (£1,735) a year won’t be subject to data sharing. Experts suggest proactive communication with tax authorities to declare potential tax obligations, emphasizing the importance of self-disclosure to avoid penalties.