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21 January 2025

New HMRC Rules Impact Online Sellers Ahead Of Deadline

Sellers on platforms like eBay and Vinted face new reporting requirements as tax deadlines loom for individuals earning above thresholds.

New rules implemented by HM Revenue and Customs (HMRC) are set to affect online sellers who utilize platforms such as eBay and Vinted. Starting this January, these platforms are required to report sales activity to HMRC, ensuring compliance with tax regulations and identifying those who may need to pay tax on their online earnings. The deadline for platforms to communicate these details is January 31, 2024.

The changes aim to clarify tax obligations for sellers. If individuals surpass 30 sales or earn more than £1,700 within the calendar year, those platforms must notify HMRC of the seller's earnings. A spokesperson from HMRC explained, "The information is meant to help you to keep track of your earnings. It might also help if you need to tell HMRC about your income or send a tax return. These reports do not replace your normal business records or tax calculations." This means online sellers need to maintain their own financial records as they navigate the new regulations.

Clare Merrills of HMRC emphasized, "There’s absolutely no change whatsoever to people who are selling things online or providing a service online. If they did have to pay tax, they'll continue having to pay tax, and if they didn't, they won't." The clarification from HMRC highlights the distinction between casual selling of personal items and organized trading activities. Sellers clearing out unwanted items from their homes may not owe tax, but those purchasing goods with the intent to resell could find themselves liable.

For many, the new rules serve as just another reminder of the importance of staying updated on tax obligations. HMRC has also launched informative resources, including videos explaining these regulations and providing guidance on what actions sellers need to take to remain compliant.

Meanwhile, another pressing tax issue is the High Income Child Benefit Charge, which affects individuals earning over £50,000. Dean Butler, managing director at Standard Life, stated, "If you earned over £50,000 during the 2023/24 tax year and you or your partner claims Child Benefit, you have to declare this on your self-assessment tax return, or you may face a penalty." It's particularly important for families to report their income accurately as the January 31 deadline approaches.

Those who are unaware could face hefty fines, as Butler noted, with potential penalties spiraling to £900 for late submissions. The HMRC has already reported substantial backlogs, with 5.4 million people yet to submit their returns as of early January.

The Personal Savings Allowance is also under scrutiny, which allows basic rate taxpayers to earn £1,000 tax-free. For higher earners, this allowance drops to £500, and those with income exceeding £125,140 receive no allowance at all. This could shift many people unwittingly impacted by the current high-interest rates closer to having to pay tax on their savings. Jason Hollands, managing director at Evelyn Partners, said, "It is really important not just to focus on the headline interest rates, but to think about the impact of tax. More and more will find they owe tax on cash savings due to the frozen nature of the Personal Savings Allowance."

Financial advisors recommend taking action sooner rather than later. They suggest using your Individual Savings Account (ISA) limits effectively to mitigate tax liabilities, with the ISA allowance currently set at £20,000 per adult. For those with larger sums, transferring cash to your spouse, who may be subjected to lower tax rates, is also advised under the Marriage Allowance.

With the current easy access rates still hovering around 4.5% to 5.0%, many savers are facing the risk of their interest becoming taxable. Experts are encouraging people to re-evaluate their savings strategies, especially as interest rates shift.

Rob Morgan from Charles Stanley commented on the savings scenario: "The interest rate picture remains positive for savers... it might be good to lock your money at fixed rates if you're concerned about declines later on." With fixed rates available above 4.7%, now is the time for savers to understand their options and act accordingly.

Despite the complexity of tax regulations, one thing is clear: the responsibility still falls on individuals to track their income and adhere to reporting requirements. Whether it’s from income generated through online sales or interest on savings, awareness and timely action are necessary to avoid future penalties.