UK (Parliament Politics Magazine) – The Low Incomes Tax Reform Group warns that HMRC’s efforts to track online income could confuse online sellers due to mismatched reporting periods.
E-commerce platforms like eBay, Vinted, and Airbnb have until the end of the month to report details of users’ 2024 earnings to HMRC, which could result in additional tax payments for some sellers.
Charity warns of tax return errors for sellers
According to the charity, a mismatch between the UK tax year and the schedule for reporting income to HMRC may result in errors in tax submissions.
The Low Incomes Tax Reform Group (LITRG) has raised concerns that more people may need to complete tax returns using data they find challenging to analyze.
The OECD’s international initiative to monitor online earnings reports for the calendar year, from January to December, adds further complexity for UK taxpayers.
UK tax timeline
The UK tax year runs from April to April, which differs from the timeframe covered by the figures submitted to HMRC by e-commerce platforms. The LITRG has raised concerns that this gap could lead to errors in online traders’ tax returns.
LITRG’s Meredith McCammond warns of tax filing struggles
A technical officer at LITRG, Meredith McCammond, explained that only one-quarter of the tax data people receive between January and March 2024 will be applicable to those filing tax returns this month. She pointed out that this coincides with HMRC’s busiest period, making it more difficult for first-time filers to receive adequate help.
Platforms must report earnings over £1,700 to HMRC
Under the revised rules, online platforms are now required to report to HMRC if users earn over £1,700 or make more than 30 transactions.
Although no new taxes have been imposed, this could lead to more individuals needing to pay taxes, particularly those who have not previously declared their earnings. In Britain, taxpayers have an annual trading allowance of £1,000, meaning individuals can make money up to that amount without paying tax.
Dawn Register from BDO highlighted that the mismatch in reporting timelines may lead to inaccurate information being provided to HMRC. However, the data will still allow authorities to recognize individuals who have engaged in online trading and may prompt inquiries, especially in cases of high transaction volumes.
Ms Register stated,
“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.”
What did the HMRC spokesperson say?
An HMRC representative stated that people selling items they no longer need are generally exempt from paying taxes. But, if the sales are part of ongoing trading or generating profit, they may be taxable.
The spokesperson added,
“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.”
RSM UK expert on tax fears over online sales
Miruna Constantin of RSM UK highlighted that the lack of clarity had caused widespread panic. Many feared that HMRC would impose taxes on money made from selling unwanted Christmas gifts.
She said,
“HMRC has now provided detailed guidance to help individuals determine whether they need to declare income from selling personal possessions, goods, or services online or from renting out property through digital platforms.”
The data will be organized into three-month blocks to help sellers. When the new rules were introduced last year, people were worried they’d have to pay tax on all their sales, which led HMRC to provide clear rules.