Is your side-hustle about to cost you dear?
As new rules are introduced to give full visibility of who is making how much money by selling online, Flic Everett – partial to a bit of Vinted – considers if it will be even worth it anymore...
It’s long been a comfort to know that no matter how woeful my freelance income, I can always stick some old dresses on Vinted or eBay and scratch up an easy few quid to tide me over. But since 1 January, selling platforms including Vinted, eBay and Etsy (along with “service” platforms Deliveroo, Uber and Fiverr) have been required to record how much cash sellers are generating and report the figure to HMRC, which will then compare the sums with self-assessment tax returns, allowing them to “check for discrepancies”.
It seems the men in black are coming for your kitsch kitchenalia and screen-printed robins – and the online selling communities aren’t happy.
“I sell party clothes I don’t need, or things I’ve never worn,” says author Rowan Coleman. “It’s not a business, but knowing anything I make might be reported to HMRC takes the fun and ease out of it. As a self-employed person I’d be confused about the implications of future sales.”
However, low-volume sellers may be worrying unnecessarily, explains accountant Rachel Harris, of @accountant_she. “While there’s lots of panic online, from the sellers’ perspective, nothing has changed,” says Harris. “There are no new taxes here, only new tax reporting from large companies.”
In the UK, rules allow sellers to earn up to £1,000 annually from a hobby or side-hustle before they need to register as self-employed and file a self-assessment tax return.
“Many people who are ‘casual sellers’ won’t be impacted because of the typically low value of the transactions,” says Harris. “But if you do earn over £1,000 a year through your hobby, then you should register.”
If you’re already freelance, any income you generate over the allowance will be added onto your self-assessment tax return – if you’re in a PAYE (pay as you earn) job, you’ll need to register separately.
Personally, the whole idea of adding to my taxable freelance income, should I have a bumper year selling frocks, seems far too much trouble – although HMRC insists that people selling clothes or items they originally bought at a higher price won’t be liable for tax on that income.
“Platforms like Vinted are working to create tools which differentiate between people selling second-hand items for less than they paid and those selling at a profit,” says Harris – though that sounds a task so labyrinthine it’s hard to see how it will be implemented quickly.
“Lots of people earn really good money on platforms like Etsy but people are getting confused about the mechanics of reporting their income, expenses and profit,” says Sarah-Jane Lewis, an “Etsy coach” who offers advice to sellers (sj-lewis.com). “Sellers will need to review their prices to ensure they have enough margin to cover their expenses, fees, taxes and profit,” she goes on. “The rule change is causing a great deal of stress for people.”
For many, the cost of employing an accountant or the time investment of registering and form-filling will mean they drop away from selling on dedicated platforms and veer towards “casual” sales outlets such as Gumtree or Facebook Marketplace, where the transaction is private and often cash-based.
“The change has put me off a bit, as I sell a lot of things and it makes it less worthwhile to sell the smaller priced items, given the amount of time it takes to list and deal with queries and posting,” agrees music school tutor Sarah Unwin. “I’m in a couple of Vinted seller groups and people are confused and even fearful because they have no idea how to deal with HMRC.”
Unwin points out that selling online for a small income is a lifeline for some – and it’s largely women with children at home or part-time low-paying jobs who will be affected. “I’m expecting to see a lot of people fined or in debt because they don’t understand the rule or how to deal with HMRC,” says Unwin.
But plenty of sellers are already registered and fully expect to pay tax. Nadia Mellis, 46, who works as a food stylist, says, “I sell my secondhand designer and good quality clothes, shoes and bags on Vestiaire and Vinted. It’s a hobby and a way of affording good clothes without paying stupid money,” she explains. “I’m not worried about the rule changes because it’s easy for me to prove that I’m not a trader.”
Mellis is meticulous about logging her own sales: “Selling sites provide you with downloadable sales documents yearly, making identifying non-taxable sales easier,” she says. “And I don’t buy new or secondhand clothing specifically to sell and profit from. That would definitely count as trading.” As a result, she continues, “A lot of people in the fashion, beauty, influencer and PR business will be caught out. They offload all the gifts and samples they receive and make a ton of cash. Their accounts are easy to spot on Vinted and Vestiaire because their stuff always comes complete with packaging, authentication and tags. They make an absolute fortune.”
One seller who agrees with the idea that online earners should pay fair taxes is Lynette Hecker, who runs Lovely’s Vintage Emporium.
“I set up Lovely’s in 2011 and it takes a lot of time, money and effort to run a proper business selling vintage and preloved,” she says. “I pay an accountant, taxes, national insurance, insurance, website costs, packaging, models... but Vinted has lowered prices in the resale market and last year my income was lower than ever before.” Hecker welcomes the change, explaining: “If other marketplace sellers will now have to pay more tax then perhaps it will mean prices rise to a more realistic level and genuine sellers like me can make a living again.”
Sarah-Jane Lewis, who runs her own Etsy shops selling prints, cards and chocolates, agrees: “If you know you are going to give your side-hustle a good go and be consistent with building your business then register. Being registered isn’t a bad thing – it’s a sign you’re taking your business seriously and want it to succeed.” Given that I make an income far below the tax threshold, I’ll carry on selling my bits of tat online – but for others, who baulk at the idea of form filling and accounting, there’s only one thing for it: the long-overdue return of the Great British jumble sale.
Eight things to know before selling online
1) If you earn less than £1,000 a year, or conduct under 30 transactions a year, you don’t need to register. There is a £1,000 allowance for “trading” income.
2) If you think you might earn over the threshold, register as self-employed at: gov.uk/working-for-yourself.
3) The platforms are now required to report the total revenue you’ve made. If you don’t tell HMRC your expenses and keep documentation and receipts, you could end up paying more than you owe in tax.
4) Use a separate bank account for your online sales, so all transactions are clearly visible and easy to calculate.
5) Selling items at a lower price than you paid for them should not be taxable – platforms are working on clarifying this. Keep receipts in the meantime.
6) The UK has signed up to the new rules via the Organisation for Economic Cooperation and Development, in a bid to find tax dodgers. Their main concern is high-income online outlets.
7) The platforms will send in their first report at the end of January 2025.
8) The rules also apply to taxi hire, food delivery, freelance contract work sites and short-term lets.
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