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Is there a ‘side hustle’ tax on selling secondhand goods?

The start of this year saw a media storm around rumours that HMRC would be cracking down on online sellers in 2024, spreading concern amongst people who sell personal items and secondhand goods on sites like eBay, Depop, and Vinted.

However, the stories about a new ‘side hustle’ tax were completely false, fuelling unnecessary panic for the public and unfounded outrage against HMRC.

Here’s what is actually happening with income tax for sellers on digital platforms.

Digital platforms reporting to HMRC

What HMRC is actually starting to do in 2024 is introduce rules by the OECD (Organisation for Economic Co-operation and Development) for digital platforms to automatically report seller details if their sales exceed a certain amount.

In a bid to reduce tax avoidance, digital platforms must pass on to HMRC the details of any sellers who make at least 30 sales on their platform or earn the equivalent of €2,000
within a calendar year. The first reports will therefore not go out until January 2025, covering the 2024 calendar year.

Neither the OECD nor HMRC has an interest in minor sellers of secondhand items, as the rules target actual traders – people who buy and sell with the intention of making a profit. Earning profit from trading has always been taxable income.

This OECD reporting measure could impact 2–5 million businesses who trade via digital platforms, but this impact should only be small, as they will also receive a copy of their reports to help them submit accurate tax returns.

Annual tax-free trading allowance

The misleading information about a ‘side hustle’ tax may also have been building on the revelation for some social media influencers and side-gig resellers that income from social media is also taxable, as many found out for the first time after receiving tax warning letters from HMRC last year.

HMRC began sending out these warning letters because many young people who use social media or online sales platforms to earn income – either full-time or as a ‘side hustle’ – didn’t realise that this economic activity is taxable.

HMRC has been raising awareness that there is actually an annual trading allowance of £1,000. This allows individuals to earn up to £1,000 (before expenses) tax-free each year, whether this is from selling old goods online or making sponsored online content.

A similar allowance of £1,000 before expenses applies for property income, which means that rental income earned through sites like Airbnb and booking.com also falls within this scope – and will also be subject to the OECD reporting regime.

Help with income tax management

Information on the advent of digital platform reporting rules is available on the government website. It’s important to acknowledge that HMRC’s insight into income sources is continually expanding, and to inform yourself of the latest changes from reliable sources to avoid falling for media misinformation.

If you are an online trader, then you should already be registered with HMRC and submitting annual tax returns if your income exceeds the £1,000
allowance. The requirements are different for registered traders than for individuals who casually sell personal goods they no longer use every now and then.

If you aren’t sure what your tax obligations are based on your online selling activity, or you need help getting your accounts in order and submitting tax returns, we have a team of accountants in Barnsley who can assist you.

Call gbac on 01226 298 298 or send an email to info@gbac.co.uk to get started.