Resale platforms obliged to share sellers' details with HMRC in "side hustle tax" crackdown

Resale platforms such as eBay, Etsy, Amazon and Vinted must now share seller information with HM Revenue & Customs (HMRC) as part of a crackdown, dubbed the "side hustle tax".

The move will allow tax authorities to detect and tackle tax evasion, while also levelling the playing field with how traditional businesses are treated for tax purposes, according to HMRC.

It comes amid a number of tax changes for the start of 2024, including changes to the national insurance rate that employees pay.

The threshold for earnings from so-called online side hustles is set at more than £1,000 a year – above this, online sellers must register as self-employed and file a self-assessment tax return at the end of the financial year.

HMRC was already able to request information from UK-based digital platforms, but Britain has signed up to new rules that came into effect at the start of this year via the Organisation for Economic Cooperation and Development (OECD) allowing it to share information with other tax authorities to access data from platforms based outside the UK.

Online platforms will be required to report seller information directly to HMRC – although not until the end of January 2025.

This will include information such as tax ID, bank account details, as well as the amount and number of transactions made by sellers with sizeable trading activity.

It will apply to digital apps and platforms – including website providers to third-party sellers – and cover the sale of goods and services, such as handmade or second-hand clothes and items, alongside taxi hire, food delivery, freelance work, and the letting of short-term accommodation or driveway parking.

While there was an outcry from consumers on social media about the move, Vinted CEO Adam Jay told the BBC that only a small proportion of sellers on its platform would be affected.

"It’s actually quite a small proportion of users of our platform who will trigger this threshold where we need to provide information," Jay told the BBC.

"It’s only those people who are making a profit from selling second hand items that might be eligible for tax and then it’s about their own personal tax situation what tax would ultimately be due to HMRC," he said.

Meanwhile in a statement, eBay said: “We are committed to ensuring that our sellers comply with tax regulations. We will work closely with HMRC to ensure a smooth implementation of the reporting requirements.”

Sustainability writer and broadcaster Lucy Siegle described the move as unfair on consumers who were making sustainable fashion choices and instead urged the Government to focus their attention on collecting tax from large corporations.

As usual there's an unfairness; clamping down on individuals in the sharing /reuse economy when UK government gives tax dodging fast fashion companies a free pass is problematic https://t.co/ZbrrH3a45s

— lucy siegle (@lucysiegle) January 2, 2024

Meanwhile others argued that consumers had already paid tax on the items they were reselling in the form of VAT when the items were purchased new. Others also pointed out that many of those selling on platforms such as eBay and Depop were on low incomes or were students looking to supplement their incomes. Those concerned they may be exceeding the £1,000 income threshold are advised to contact the tax authorities for clarification.

Taxing people who sell their personal items on Vinted, Depop, etc is not only harming them financially by essentially taxing them twice, but it’s also a deterrent for being more sustainable. People aren’t going to bother with the faff, and it’ll lead to more waste in landfill

— Shannon Alexandra (@shannonalxndra1) January 2, 2024

The so-called "side hustle tax" arrangement is not unique to the UK with countries, such as the United States and Australia introducing similar measures.

Another New Year tax change is coming to the UK on 6 January, which may be more welcome to consumers, with the cut to the national insurance contribution (NIC) rate from 12% to 10% for earnings between £12,570 and £50,270.

However self-employed workers will have to wait until 6 April for national insurance cheer, when Class 2 contributions will be axed altogether and their main NIC rate will be cut from 9% to 8%.

The rate change was announced in the Chancellor’s autumn statement and will stay at this new level throughout the 2023/2024 tax year.

Also from 1 January, consumers will also no longer pay VAT on period pants following a two-year campaign, saving up to £2 (or 16%) on average – following Jeremy Hunt’s pledge in his November statement to scrap the tax.

But there are some unwelcome tax changes in the offing for April, when the thresholds for dividend tax and capital gains tax will drop again, while the Government has yet to hint at any end to the freezing of tax thresholds.

Sian Steele, head of tax at Evelyn Partners, said: “The NI cut will bring a bit of New Year cheer for millions at a time when there are many pressures on household incomes.

“But taxpayers should put it in the context of a steady rise in the overall direct tax burden that has been driven by frozen income tax and other tax thresholds and allowances that have fallen in at least real and in some cases nominal terms since 2021-22, and will continue to erode take-home pay and disposable incomes until 2028.”