UK households engaging in a pre-Christmas clear-out are being issued a serious warning: HM Revenue and Customs (HMRC) is actively monitoring online selling activity, and this heightened scrutiny is far from an empty threat.
The New Data-Sharing Rules
Since the start of this year, HMRC has gained unprecedented visibility into the digital marketplace. Online platforms, including giants like eBay and Vinted, are now legally required to provide data on users who conduct more than 30 transactions per year.
For Vinted specifically, the reporting criteria are even tighter. The platform must report user data to HMRC if a seller makes 30 sales in a year or if their gross sales exceed £1,700 over a 365-day period. This applies regardless of whether the seller made a profit, focusing purely on the volume and value of transactions.
Consequences of Non-Compliance
Lee Murphy, Managing Director of The Accountancy Partnership, explains how HMRC is using this new power. “HMRC uses the platform, whether this is Etsy, Vinted or even eBay, to match against each individual’s tax return,” he stated.
Murphy emphasised that this is not merely a scare tactic. Individuals who have earned over the £1,000 annual trading allowance and fail to declare it may initially receive reminder letters. However, ignoring these warnings can have severe repercussions.
Non-compliance could trigger in-depth tax inquiries or even criminal investigations, potentially resulting in substantial fines that surpass the original earnings from sales.
Who Needs to Take Action?
It is crucial to understand the distinction between a casual clear-out and a taxable trading activity. If you are simply selling unwanted personal items from your home and are not engaged in repeat, business-like trades, you are unlikely to face scrutiny from HMRC.
The red flags are raised if your activities constitute a 'side hustle'. You must inform HMRC if:
- You earn over £1,000 from your side hustle in a tax year.
- You exceed 30 sales within one year.
Murphy advises sellers who are unsure of their position to take immediate steps. “If you’re unsure of how many items you’ve sold or how much money you’ve made so far, then it’s best to go back and find your detailed sale records,” he recommends.
He also highlights the importance of recording expenses related to your sales, such as postage, packaging materials, and courier fees, as these can be offset against your income when completing your self-assessment tax return.
