Ecommerce as a side hustle? Here’s what the new tax rules mean for you

Ecommerce as a side hustle? Here’s what the new tax rules mean for you | 4-minute read 

Platforms such as Etsy, eBay, and Facebook Marketplace have opened up the world of ecommerce to those who view it as a hobby, or side hustle, alongside their regular job. These low cost, low input platforms have made it incredibly easy for people to monetise their hobbies, selling anything from handmade jewellery and candles, to clothes, records, and everything in between.

But now HMRC has released new measures to ensure that those making sales via these platforms are paying the correct tax, and they’ve invested an initial £36.9m developing the new system and have also hired a team of 24 staff to enforce it, so it’s safe to say they’re taking it seriously.

Here’s everything you need to know about the new tax rules and what they mean for you.

What are the new tax rules for online marketplaces?

The latest rules introduced by HMRC mean that online platforms, such as eBay, Vinted, and Marketplace, will be required to submit an annual report with the details of all sellers trading on their platforms. The report must include the names and sales volumes of each individual seller and will be sent to HMRC automatically.

As well as collecting this information from UK platforms, HMRC will also be able to collect it from international platforms, such as TikTok, Etsy, and Amazon.

It’s worth noting that this isn’t a new type of tax, it’s simply that platforms are now required to automatically report their sellers so that HMRC can ensure they are paying the correct amount of income tax. And, in reality, HMRC has always been able to request this information if they had reason to believe sellers weren’t paying the tax they should, it’s just now the information will be sent automatically for every seller.

Who will be impacted by the changes?

According to HMRC, the aim of the new policy is to crack down on sellers who are using the platforms in a bid to avoid paying tax.

The changes will impact all sellers across almost all online platforms. However, platforms aren’t required to report those who make less than 30 sales, regardless of how much revenue those sales generate.

Will I be affected if I sell my old clothes online?

No, if you’re selling your own unwanted or used goods online, you won’t need to register to pay tax. However, if you buy items with the specific intention of reselling them, you will need to register as soon as your income exceeds £1,000 in a single tax year.

If you’re selling your own belongings online, you’ll only need to tell HMRC if:

• You sell more than the current Trading Allowance of £1,000
• You sell a personal item for more than £6,000 or more (in this instance, you may be liable for Capital Gains Tax)

What information will be shared with HMRC?

All platforms will be required to report the following information for each seller:

• Name
• Address
• Date of birth
• Unique Tax Reference Number or VAT number
• Company number

This information will be passed to HMRC on the 31^st January of the following year, so the information on sales in 2024 must be reported by 31 January 2025, for example.

What happens if platforms don’t report the necessary information?

If platforms don’t submit their reports on time, they will risk penalties of £5,000, with an additional charge of up to £600 per day that the information remains unreported.

Why choose Unicorn Accounting?

Ensure you keep on top of your ecommerce finances and tax obligations by outsourcing to an accountant.

At Unicorn Accounting, we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management, bookkeeping, cash flow statement, and tax filing services to support and scale your business.

Our team of accountants and Xero-certified advisors have experience working with both small start-ups and family-run online stores to large-scale, international retail and e-commerce brands.

If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience, and skills with innovative technologies. To see how we can help you maximise the scalability of your e-commerce brand all year round, get in touch with Unicorn Accounting today. Or click here to get a free quote.

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