Side Hustlers Beware: HMRC Targets Online Marketplace Sellers
We understand that recent developments from HM Revenue & Customs (HMRC) may be causing concern for individuals earning income through online sales or side activities. HMRC has launched a targeted campaign to identify those who may have undeclared tax liabilities from online marketplace sales in 2022/23 and earlier years, while also launching a new awareness campaign educating individuals with ‘side hustles’ of their tax obligations.
HMRC’s letters to online sellers
As of 1 January 2024, online marketplaces must, by law, gather certain data on users of their platform and provide this data to HMRC. The data collected includes users’ names, addresses, dates of birth, National Insurance Numbers, fees paid, and earnings.
HMRC has received its first batch of data and have commenced a new letter campaign, contacting individuals who have earned income from online platforms such as eBay, Vinted, Etsy, or Amazon.
Beyond online marketplace sales, HMRC is also increasing efforts to educate individuals about the tax implications of additional income streams, including freelancing, gig economy work, and renting out property.
If you have received a letter from HMRC, it is crucial to take the necessary steps to review your income and ensure compliance in order to minimise the potential for late payment interest and punitive penalties.
As tax advisers, we can assess your circumstances and help you determine whether your online activity qualifies as a taxable business.
Steps to take if contacted by HMRC
- Review your online sales history and determine whether your activity qualifies as trading.
- If you believe you have undeclared income, making a voluntary disclosure through the Digital Disclosure Service (DDS) will reduce penalties.
- We can assist you in reviewing your position and, if necessary, communicating with HMRC to ensure compliance while minimising late payment interest and potential penalties.
Key considerations
It is important to note that the underlying rules governing the requirement to register for Self Assessment have remained undisturbed, and that not all online sales are taxable;
- Trading allowance: If your total income from online sales is less than £1,000 per year, you benefit from the Trading and Miscellaneous Income Allowance and do not need to declare this income or pay tax on it.
- Regular trading: If you regularly buy or make items to sell for profit, you are considered to be trading. In this case, you must register for Self Assessment if your total income exceeds £1,000 per tax year.
- Occasional sales: Selling personal possessions occasionally, such as unwanted items from your home, typically does not require registration for Self-Assessment unless the items sold are worth more than £6,000, in which case Capital Gains Tax may apply.
- Rental income rules: Earnings from short-term lets (e.g., Airbnb) may be taxable and should be declared appropriately.
- Tax deadlines: The deadline to register for Self Assessment for the 2025/26 tax year is 5 October 2025. Filing deadlines and payment obligations must be met to avoid penalties.
How we can help
If you have received a letter from HMRC or are unsure about your tax obligations, we can provide expert advice tailored to your specific circumstances.
If you are concerned about HMRC’s recent actions or have received a letter regarding undeclared income, do not ignore it. Please contact Nicholas McLeman for a confidential consultation to discuss your position and ensure you remain compliant with tax regulations.
More information