HMRC is ramping up its crackdown on tax payments, and has focussed on online sellers.
Online sellers who sell more than 30 items or make more than £1,700 on marketplace platforms are reportedly being asked to share their tax info due to an HMRC crackdown on tax payments.
The requests are causing a bit of a stir but are actually prompted by new reporting rules for websites like eBay, Vinted and Depop, which allow users to sell goods or services.
These rules are related to new tax transparency rules, and compel the ecommerce platforms to hand over seller information to HMRC if certain thresholds are met.
When does tax apply?
The OECD rules are all about helping HMRC identify people who may have earned an undeclared trading income. Under the new guidelines, which came into force in January 2024, platforms must share details with HMRC.
These include the seller’s name, address, total sales and tax identification number (or National Insurance number). It is the latter that sellers are reporting they are being asked for as this isn’t a detail they would have shared with these platforms before the new rules came into place.
So, does the tax apply? Well, HMRC is using the data gleaned to check the nature of your selling. There is a tax implication for the difference between casually selling secondhand items for less than you originally paid for them or selling personal items as compared to selling frequently. Essentially; reselling for profit or actively marketing yourself as a business.
If your sales are deemed as private sales, you don’t need to pay tax. However, HMRC might decide that you are a trader if you hit the two thresholds; regularly buy and sell; or have a side hustle for which selling forms a part. In that case, you might owe tax.
What happens if you are deemed a trader?
If HMRC decides that your income is taxable, they will notify you and your reporting responsibility changes, and you may need to register for a Self Assessment tax return.
Keep in mind that the Government is rolling out Making Tax Digital for self-employed workers from April 2026 so, depending on earnings, you may have to invest in accountancy software.
Once set up as a sole trader with HMRC, you will need to keep proper financial records including sharing your sales and expenses. At this point, it is also wise to gem up on allowable expenses, the trading allowance and how to keep accurate records.
While this may feel onerous, the cost of non-compliance is higher and this is also an area that HMRC is really focussed on at the moment. Being unprepared isn’t a valid excuse so if you are selling for a profit, it’s best to start keeping records in case that notification from HMRC arrives.
