A HUGE change is hitting tomorrow for anyone who sells clothes or other items on Vinted or Depop.
From January 1, HMRC will be cracking down on people who earn extra income through various side hustles.
GettyA huge change is hitting tomorrow for anyone who sells clothes or other items[/caption]
If you rent out your tech on Fat Llama, drive cars for Uber or freelance on Fiverr, your income will soon be reported to HM Revenue and Customs (HMRC).
It comes as part of a wider tax crackdown from HMRC on those who boost their income via side hustles.
This also includes millions of people who sell their clothes online.
The number of sellers on platforms like Depop and Vinted has increased in recent years as an easy way to earn some extra money.
Now that Christmas is over, sellers are likely to list hundreds of unwanted gifts, so it’s important to know how the changes may affect you.
Under the new system, sellers could be slapped with an unexpected tax bill if they don’t comply with necessary tax regulations.
From tomorrow, HMRC will direct platforms to record how much money people make by listing their services and items on them.
Those with a side hustle will still be expected to fill in a tax return and pay what they owe the HMRC every year.
But, the taxman will also go directly to these platforms, which will become responsible for recording the same information and handing it over to HMRC
HMRC will then be able to use this data as well as any submitted tax returns to work out if there are any discrepancies.
The agency previously said it would invest £36.69million in the initiative and bring in 24 full-time staff to launch and enforce the measures, which aim to “bear down on detect and tackle tax evasion”.
Miruna Constantin, tax manager at accountancy group RSM, previously warned sellers: “It’s never been easier to sell on that ugly festive jumper or garish socks with online platforms like Vinted.
“However, it’s important to understand the tax rules or they could get a costly shock from HMRC in the future.”
These new measures will also affect people renting out properties on Airbnb and other property rental platforms, or selling other services online.
Miruna said: “These platforms have been warned to brace themselves against landing in hot water with HMRC.”
The first reporting deadline for the platforms will be one year after the rules are introduced, on January 31, 2025.
To meet the strict requirements must bring in new ways of collecting seller details to pass on to HMRC in the correct format.
The taxman will then verify it against its own records to make sure sellers and renters are correctly reporting their income on their tax returns.
Miruna warned: “There will be hefty fines and penalties for failing to submit reports or submitting ‘inaccurate, incomplete, unverified sellers’ records’ so the platforms will be incentivised to ensure they meet their reporting obligations.”
If you know you don’t sell very often don’t worry, if you make no more than £1,700 for fewer than 30 sales in a reporting period, information is not required to be provided to HMRC.
However, that doesn’t mean you do not have any tax reporting obligations.
Miruna said: “If you have a profit-seeking motive, for example, buying premium items from outlets to sell at a profit online, your little side hustle might be seen as trading.”
The number of transactions you make, or the nature of the assets you sell, will also determine your tax position.
“You may need still to file a self-assessment tax return with HMRC and pay income tax and National Insurance contributions paid accordingly,” she warned.
It can be complicated for those who may not be aware of the ins and outs of the tax process, or who only sell items online occasionally.
A simple rule of thumb is if you make £1,000 or more in a year in sales, you’ll need to consider whether a tax return is required.
Miruna said: “The good news is, the information collected by platforms must be shared with HMRC as well as with sellers, which should help taxpayers get their affairs right.
“However, it can come as a surprise to many individuals, leading them to prepare tax returns for the first time and make some think twice about that wardrobe spring clean.”
How do you know if you need to submit a tax return?
Self-assessment is a system HMRC uses to collect income tax.
Tax is usually deducted automatically from wages, pensions and savings, but people and businesses with other incomes must report it in a tax return.
This applies to the following:
Your income from self-employment was more than £1,000
Earned more than £2,500 from renting out property
You or your partner received high-income child benefits and either of you had an annual income of more than £50,000
Received more than £2,500 in other untaxed income, for example from tips or commission
Are limited company directors
Are shareholders
Are employees claiming expenses over £2,500
Have an annual income over £100,000
Before you can complete and submit your tax return, you’ll need to have a so-called unique taxpayer reference (UTR) and activation code from HMRC.
This can take a while to receive, so if it’s the first time you’re completing a self-assessment, make sure you register online immediately and ask HMRC for advice.
To sign in or register visit the “Self Assessment tax return” section of HMRC’s website.
If you’ve already signed up for self-assessment, you can find your UTR in relevant letters and emails from HMRC.
HMRC accepts your payment on the date you make it, not the date it reaches its account – including on weekends.
The deadline for filing your self-assessment tax return by post is October 31.
If you miss the deadline by up to three months you will be charged a £100 penalty.
If you miss the deadline by over three months you will be charged more on top of this.
But don’t worry as if you don’t send your paper form on time, you can fill out your tax return online.
You have to do by January 31, 2024.
If you need to change your tax return after you’ve filed it, you can do so within 12 months of the original deadline or you can write to HMRC for any changes after that.
Filling in your tax return can seem daunting, but with our step-by-step guide you’ll have it sorted in no time.
How much can I be fined for filing my taxes late?
Late filing fees are pretty steep, so make sure you get your self-assessment return in before January 31.
According to HMRC, you’ll get a £100 fine for failing to file your return a single day after the deadline.
Then, a £10 daily fine applies every day you don’t submit your tax return.
This is capped at 90 days – or £900.
So on top of the initial £100 fee, a £1,000 maximum late filing fine applies.
If you’re six months late, there’s a further £300 fine or 5% of the money you owe – whichever is higher.
That’s on top of the daily £10 charges built up so far, so there’s no shortcut to a smaller payment once you’re late.
And after 12 months, another £300 or 5% fine applies.
Interest is also added on top of this.
If you deliberately haven’t filed your tax return, a fine of up to 100% of the tax due could then be sent too.
Meanwhile, millions of Brits will want to be in the know ahead of 17 money changes set to hit in 2024.
Plus, people are only just realising that their side hustle could land them with an unexpected bill.
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