New UK tax rules on side hustles like eBay and Vinted may lead to ‘nasty surprises’

A push by HMRC to uncover details of how much people are earning from selling goods and services online in “side hustles” could cause confusion because of the way the UK’s tax system operates, a charity has warned.

Sites such as eBay, Vinted and Airbnb have until the end of this month to tell HMRC about the amount of money some users made in 2024, details that may lead to the sellers having to pay more tax.

But because the UK tax year runs over a different period from the details being reported to HMRC, a charity has warned that people might record the wrong details in their tax returns. The Low Incomes Tax Reforms Group (LITRG), a charity, said that more people might now have to file tax returns, but using information they find hard to manage. The new push to uncover how much people are earning online is an international initiative by the Organisation for Economic Co-operation and Development (OECD), with reporting dates of January to December.

The UK tax year runs from April to April, which means that the figures filed to HMRC by the platforms will cover a different period. The LITRG says it is worried that online traders will use incorrect figures in their tax return.

Meredith McCammond, a technical officer with the LITRG, said that just one quarter of the tax data that people will receive – from January to March 2024 – will be relevant to people filling out a tax return this month. This happens at the busiest time of year for HMRC, she says, and it may be harder for the many people who will be doing a tax return for the first time to get help.

Under the new guidance, platforms have to tell HMRC if someone makes more than £1,700 in a year, or completes 30 transactions. There are no new taxes but there is the possibility that more will have to pay tax as they may not have declared their earnings before. Under UK law, everyone has a trading allowance each tax year, which means they can earn up to £1,000 without paying tax. Dawn Register of the accountancy firm BDO says that the date discrepencies mean HMRC won’t get data that is accurate. “But it will be enough to identify if an individual has been trading – and to launch a tax investigation if there are high turnover numbers,” she says.

“The new rules may well mean that there are some nasty surprises in store for people who are either ignorant of the rules or trying to get away without paying tax on their trading earnings. There may also be some surprises for HMRC when they see how much some people are earning from online platforms.”

A spokesperson for HMRC said that if someone was selling unwanted items from around the house, they would be unlikely to have to pay tax. But if they were trading or make a gain on the sales, they might be liable. “For people selling personal possessions online absolutely nothing has changed. If you aren’t trading and just occasionally sell unwanted items online there is no tax due.”

The data that is provided will be broken down into three-month quarters to make it easier for sellers to use. When the new procedures began a year ago, people were afraid they would have to pay tax on everything they sold, prompting HMRC to clarify the matter. “The lack of guidance terrified people and chaos ensued when they thought HMRC will come to tax the extra cash they made by selling unwanted Christmas gifts,” said Miruna Constantin of accountants RSM UK. “HMRC has now issued detailed guidance helping individuals determine whether they need to declare income received from selling personal possessions, goods or services online or renting out property using digital platforms.”