Do you need to pay tax on eBay, Vinted, and Airbnb income?

A change in the information HMRC can collect on sellers using eBay, Vinted and other online marketplaces is causing a storm on social media. But what does it mean for you?

If you're thinking of starting a side hustle in 2024, or you simply plan to keep selling your old things occasionally, take note. HMRC has told online marketplaces, and other popular 'second income' apps like Airbnb and Uber, to collect data on how much users make from sales or for providing services. 

This data will be used to determine who needs to pay income tax on what they've earned. While this might sound scary, many sellers won't be affected at all by the new change. 

Here, we unpack HMRC's latest clampdown and explain whether you'll need to pay a tax bill on your side hustle income.

What's changing?

The tax office has long had the power to demand that UK-based apps and websites provide data on the income its users make. But as many digital platforms are based overseas, such as holiday letting sites, some tax dodgers were potentially slipping through the net. 

HMRC has now signed up to the Organisation for Economic Co-operation and Development (OECD) rules, which will allow it to investigate the tax affairs of people earning an income via a company that is based in another country, such as Airbnb and eBay. 

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Who's affected by HMRC's clampdown?

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So if you're just selling the odd pair of jeans on Vinted, the chances are you won't be affected by this change at all. 

Keep in mind that the rule around who owes tax for making money from side hustles hasn't actually changed. You still have a £1,000 trading allowance, which means anything you earn below £1,000 from these kinds of platforms selling your old clothes or tech is tax-free. Similarly, if your additional income is made from monetising your property in some way – like renting your driveway – up to £1,000 can be covered by the property allowance. 

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Do I need to file a tax return?

Thanks to the trading and property allowances, you won't owe tax from online sales or property-related services unless you make more than £1,000 in each area. 

If you exceed either of these allowances, then it's your responsibility to declare your income to HMRC via a self-assessment tax return.

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All of this is assuming you're selling your old things online on the side. If you're creating or modifying goods yourself – say, designing and knitting clothing to sell on Etsy – it's a bit different. You're now running a (potentially very) small business, not just earning extra money. 

You still might not owe tax, depending on how much you earn, but you should fill out a self-assessment tax return anyway to find out. The same goes if you're making money from providing services such as Uber rides.

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How much tax could I pay?

Let's say you make £1,700 from selling your old clothes on the side and £30,000 in your job over the tax year 2023-24 (which runs from 6 April 2023 to 5 April 2024). 

You just need to add the two figures together to find out your total taxable income for the year (£31,700).

You can then deduct the £12,570 personal allowance (the amount of income you can earn before paying tax) and the £1,000 trading allowance relief.

In this scenario, you pay tax at the basic rate (20% or 19% if you live in Scotland) on £18,130 of your income. 

In reality, as your employer will normally pay tax to HMRC on your income on your behalf you just need to worry about paying the basic rate tax owed on £700.

If your only income in 2023-24 was £1,700 from selling your old clothes, you wouldn't pay any tax at all. That's because the £700 income that exceeds the trading allowance does not exceed the £12,570 personal allowance.

But if your income comes to more than £50,270 (£43,663 in Scotland) a year, you'll be subject to higher-rate tax (40% or 42% if you live in Scotland) on the portion of income that exceeds the threshold.

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How do I file a tax return and pay a tax bill?

All of this might make you realise you need to file a tax return for the first time. 

You'll then have until 31 October 2024 to file a paper tax return or 31 January 2025 to file an online return and to pay the tax you owe for the 2023-24 tax year. 

It's a good idea to file early to find out what your tax bill is. If you do it before 30 December 2024 and your bill is under £3,000 you can opt for what you owe to be taken via PAYE. If not you must pay the bill in full by midnight 31 January 2025 or face a fine.

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source https://www.which.co.uk/news/article/do-you-need-to-pay-tax-on-ebay-vinted-and-airbnb-income-aSHaR5b8O6MN