If you are earning some extra income from selling goods or services online, you may be wondering how the new HMRC rules that came into effect on 1 January 2024 will affect you.  In this blog, I will explain what the new rules are, who they apply to, and what you need to do to comply with them.

What are the new rules?

The new rules require digital platforms, such as eBay, Vinted, Airbnb, or Uber, to collect and report information about the income of their UK-based users to HMRC.  This information includes the name, address, date of birth, national insurance number, and gross income of the users, as well as the fees paid to the platform and the address of any property let.  The platforms will have to share this information with HMRC by the end of January 2025, and every year thereafter.

The aim of the new rules is to help HMRC identify and tax the income of online sellers and traders, who may not be declaring it correctly or at all. 

Who do the new rules apply to?

The new rules apply to anyone who earns income from selling goods or services online, whether as a hobby, a side hustle, or a main source of income. This includes:

• Selling new or used items, such as clothes, books, or collectables, through online marketplaces or platforms
• Providing services, such as taxi, delivery, or freelance work, through online platforms or apps
• Letting out property, such as a room, a flat, or a holiday home, through online platforms or websites

The new rules do not apply to income from employment, pensions, savings, investments, or dividends, which are already reported to HMRC by other means.

What do you need to do to comply with the new rules?

If you are earning income from online selling or trading, you need to do the following to comply with the new rules:

• Keep records of your income and expenses from online selling or trading, such as invoices, receipts, bank statements, or platform reports
• Check if you need to register for Self Assessment and file a tax return. You need to do this if your total income from all sources is more than your personal allowance (currently £12,570), or if your income from online selling or trading is more than £1,000 per tax year. You can use the trading allowance to deduct up to £1,000 from your income from online selling or trading, but you cannot use it to create a loss. You also need to register for Self Assessment if you have other reasons to do so, such as being a company director, having foreign income, or having capital gains
• Pay the right amount of tax and national insurance on your income from online selling or trading. The amount you pay depends on your total income, your tax rate, and your expenses. You can use HMRC’s online tools or a tax adviser to help you calculate your tax liability
• Be aware of the penalties for not complying with the new rules. If you fail to register, file, or pay on time, or if you underreport or overclaim your income or expenses, you may face fines, interest, or even criminal prosecution by HMRC

Conclusion