Online selling is extremely popular, and many people choose this convenient method for selling their products or services. However, many myths surround it, particularly regarding tax rules and obligations. The aim of this article is to clarify the most common misconceptions and provide an overview of the actual legal framework. You will find out when you need to pay taxes, under what conditions you need to file a tax return, and how the rules affecting online sales will change from 2024.
Myth:
If I sell my own clothes online, I have to pay tax on them
Fact:
The sale of personal items does not fall under the obligation to declare online sales. This does not make you an online trader.
Myth:
HMRC now treats all online sellers as sole traders
Fact:
If you trade products or provide services on digital platforms, HMRC views this as a side job, and if you earn over £1,000 from this activity in a tax year, you will be required to file a tax return. However, this does not apply to the sale of personal items on online marketplaces. Selling your used clothes, furniture, or electronic devices does not make you an online trader.
Myth:
HMRC is now checking all online sellers
Fact:
From 1st January 2024, online platforms are required to report certain information about their users to HMRC, but only if certain conditions are met. If you have conducted fewer than 30 transactions and generated less than €2,000 (approximately £1,700) in sales, no report will be made about you.
When registering on an online platform, you will need to provide several personal details, such as your name, address, date of birth, and tax number.
Online platforms include any software, web, or app-based platform through which products or services can be sold. This applies not only to sellers on platforms like eBay, Amazon, or Etsy but also to service providers (e.g., food delivery, ride-sharing, taxi services, freelance programming, property letting, etc.).
According to the new regulations effective from 1st January 2024, online platforms will file annual reports about their users. For example, data collected between 01/01/2024 and 31/12/2024 will be reported to HMRC by 31st January 2025. Platform users should also receive a copy of this report, which will assist them in preparing their future tax returns.
The report or online sales above the specified limit does not automatically mean a tax payment obligation, only a reporting obligation. Taxes, however, will be calculated on the profit made, not the revenue.
If you sell online and require accounting assistance, please feel free to contact us using the provided details.
