As of January 31st, 2024, online marketplaces such as eBay, Vinted, Etsy, and Facebook Marketplace are now required to report seller information to HM Revenue and Customs (HMRC). This change, driven by new OECD tax transparency rules, aims to prevent tax evasion by ensuring that people who make significant income through these platforms pay their fair share. However, critics argue this is nothing more than a “side hustle tax” that unfairly targets small-time sellers and individuals trying to make some extra cash.
So, what does this rule actually mean for sellers, and is it really a “side hustle tax” or just tax fairness in action?
What’s Changing?
Under the new rules, online platforms such as eBay, Vinted, and Etsy must report seller details—including how much they have earned through sales—to HMRC. This follows the UK’s adoption of the OECD’s Model Reporting Rules for Digital Platforms, which are designed to improve tax transparency across international online marketplaces.
The key points of the rule include:
- Platforms must collect and report details of sellers who make more than 30 transactions per year or earn over €2,000 (£1,700) annually from sales.
- HMRC will receive seller data automatically from these platforms and can cross-check this against tax returns.
- The rules apply to both UK and overseas online platforms operating in the UK market.
This means that if you’re selling a few second-hand items occasionally, you’re not affected. But if you’re regularly selling items online, HMRC will now have visibility over your earnings.
Why is HMRC Doing This?
HMRC says these measures are about closing tax loopholes and making sure that those who are effectively running businesses through online sales are paying the right amount of tax.
Under UK tax law:
- If you’re selling personal items (like second-hand clothes or old furniture), this is not taxable.
- If you’re buying items specifically to sell for a profit, this is considered trading, and you must declare your income.
- The Trading Allowance allows individuals to earn up to £1,000 per year tax-free from casual sales. Above this, you must register as self-employed and report earnings.
HMRC argues that many people making thousands of pounds in online sales are not reporting it. By enforcing these new rules, they hope to crack down on tax avoidance and level the playing field for small businesses that already comply with tax laws.
Criticism: Is This a “Side Hustle Tax”?
Despite HMRC’s reasoning, the new reporting requirements have faced backlash from sellers, critics, and some politicians. The main concerns are:
- Targeting Small Sellers Instead of Big Corporations
Critics argue that large corporations often use tax loopholes to avoid paying millions in tax, yet the government is focusing on small online sellers who might be earning just over the £1,000 threshold. - Discouraging Extra Income During a Cost-of-Living Crisis
With the UK still experiencing high inflation and economic uncertainty, many people rely on side hustles to cover rising living costs. Critics say this policy discourages individuals from selling online by creating unnecessary fear and bureaucracy. - Confusion Over Who Needs to Pay Tax
There is widespread misunderstanding about whether casual sellers will have to pay tax. Many fear they’ll get caught up in HMRC investigations even if they haven’t done anything wrong. Some experts suggest HMRC should provide clearer guidance to sellers to prevent unnecessary panic.
What Should Online Sellers Do?
If you sell regularly on eBay, Vinted, or similar platforms, here’s what you can do to stay compliant:
- Check Your Earnings: If you make less than £1,000 per year, you don’t need to do anything.
- Keep Records: If you sell frequently, track your sales and expenses to determine if you owe tax.
- Understand Tax Obligations: If you exceed the threshold, you may need to register as self-employed and submit a Self-Assessment tax return.
- Differentiate Between Personal and Business Sales: Selling old clothes or second-hand furniture is not taxable, but buying items to resell for profit is.
Final Thoughts: Fair Taxation or Unfair Crackdown?
The January 31st rule change is undoubtedly a major shift for online sellers, but whether it’s fair or not depends on perspective. HMRC sees it as a necessary step to prevent tax evasion, while critics believe it unfairly burdens people just trying to make ends meet.
For casual sellers, the changes might have little impact. But for those making consistent income from online selling, it’s time to take tax compliance seriously—or risk a surprise letter from HMRC.
What do you think? Is this a fair tax measure, or an attack on small sellers? Let us know in the comments!