HMRC is looking into the incomes of four million online sellers to crack down on anyone not paying enough tax.
Online sellers must pay tax if they earn more than £1,000 in a single tax year from making or buying things to sell for a profit.
People who sell their old items for less than they paid for them don’t need to pay any tax on the earnings.
Since 2024, a rule change has been in place requiring online platforms like eBay, Vinted and Etsy to share information with HMRC on users who make more than £1,700 a year, or more than 30 sales annually.
A Freedom of Information request by accountancy firm BDO has now revealed HMRC collected data on 3.99million sellers last year.
That’s up from just 1.5million the year before.
The value of reported sales rose from £25.5billion to £54.8billion over the year.
Although HMRC has information on millions of sellers, it can’t yet issue fines.
It revealed it doesn’t yet have the right systems to do so, because at the moment it has to extract the data manually.
However it says new systems are “in the final stages of development and will allow us to effectively review this data and carry out compliance activity going forward”.
Dawn Register, a tax dispute resolution partner at the accountancy firm, said the new data will be an “absolute game-changer for HMRC and a goldmine for tax inspectors seeking to ensure that online sellers pay the right amount of tax”.
If you owe tax, you should inform HMRC by filling out a self-assessment form.
An HMRC spokesman told The Telegraph: “Absolutely nothing has changed – people selling unwanted items online from time to time are not liable to pay tax on that activity. As has always been the case, some people trading via websites or selling services online may need to register for Self Assessment.”
Do I need to pay tax on my side hustle income?
MANY people feeling strapped for cash are boosting their bank balance with a side hustle.
The good news is, there are plenty of simple ways to earn some additional income – but you need to know the rules.
When you’re employed the company you work for takes the tax from your earnings and pays HMRC so you don’t have to.
But anyone earning extra cash, for example from selling things online or dog walking, may have to do it themselves.
Stephen Moor, head of employment at law firm Ashfords, said: “Caution should be taken if you’re earning an additional income, as this is likely to be taxable.
“The side hustle could be treated as taxable trading income, which can include providing services or selling products.”
You can make a gross income of up to £1,000 a year tax-free via the trading allowance, but over this and you’ll usually need to pay tax.
Stephen added: “You need to register for a self-assessment at HMRC to ensure you are paying the correct amount of tax.
“The applicable tax bands and the amount of tax you need to pay will depend on your income.”
If you fail to file a tax return you could end up with a surprise bill from HMRC later on asking you to pay the tax you owe – plus extra fees on top.
