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HMRC changes for online marketplaces

Online marketplaces offer a much broader reach for online sellers, with almost one third of UK workers topping up their earnings from selling goods or services on the likes of eBay, Etsy and Airbnb.

It’s the responsibility of sellers to determine whether their sales or rental income needs to be reported to HMRC. And, until now, HMRC have only had the power to access records from marketplace providers on an ad-hoc basis.

New rules

However, from 1 January 2024, these online marketplaces will be required to report details of transactions to HMRC, a power given to them under new regulations in the hope of tackling non-compliance and recovering tax on undisclosed trade and rental income from taxpayers. Whether a taxpayer needs to report income from selling goods and services depends on if the individual is considered a ‘trader’ by HMRC’s standards which, for example, make a distinction between selling unwanted possessions and selling items with the aim of profit.

Anyone regarded as operating a trade and receiving income of more than their £1,000 trading allowance across all trades (whether online or offline) needs to make sure their tax affairs are up to date with HMRC. National Insurance may also be due.

Similarly, any taxpayer receiving income derived from rents (e.g. from Airbnb) would also be permitted to receive £1,000 of property income in total across all properties, before being required to report this to HMRC and pay any tax. There is no “test” of whether rental income is taxable or not, like with trading income. If rental income is received in excess of £1,000, this needs to be reported (unless you qualify for any other relief – for example “rent a room” relief) and tax may be payable.

But what about previous years?

Those who have been in receipt of income over their allowance on digital platforms prior to this change in legislation will need to look back and address the tax and National Insurance they owe. This should be done through submitting or amending previous tax returns or through a voluntary disclosure.

How old the unpaid taxes are determines which options are available. Interest will be payable on overdue tax, while penalties could also be due. Sorting any past issues should therefore be dealt with sooner rather than later to minimise interest and penalties.

If you think you could be affected, please get in touch with your usual BHP contact or call 0333 123 7171.