In May 2023, we reported how new online sales tax rules were round the corner. These came into force on 1st January 2024. With that in mind, now’s a good time to give you a recap on the new rules and give you more detail about what they entail.

What’s changing with online sales tax rules?

The new rules will apply to a variety of ‘digital platforms’. These include sites such as eBay, Airbnb, Etsy, Vinted, Uber and Fiverr.

The changes have their roots in a set of rules created by OECD. These require certain online platforms to share data about sellers with tax authorities. These include HMRC.

Which digital platforms are affected?

In the OECD report, Model Reporting Rules for Digital Platforms, it says:

“Whereas the Model Rules cover income derived from the provision of accommodation, transportation and other personal services, some jurisdictions may be interested to also exchange information in respect of the sale of goods and the rental of means of transportation facilitated by digital platforms”

In the UK, a government consultation focused on:

“digital platforms that facilitate the provision of services, such as taxi and private hire services, food delivery services, freelance work and letting of accommodation, as well as those that facilitate the sale of goods and transport rental.”

As you can see, the new rules are very broad ranging. If you sell online via a digital platform, you’re likely to be affected in some way.

How do the new online sales tax rules affect digital platforms?

Affected digital platforms must now collect seller data in compliance with OECD regulations. This data includes names, addresses, dates of birth, taxpayer reference numbers, business registration numbers and details of any transactions.

The platforms then have to pass on this data to HMRC, which will then cross-reference it against its own databases. The aim is to spot discrepancies and, in particular, undeclared income. Where HMRC spots discrepancies, it is likely to chase any unpaid tax and apply penalties as appropriate.

The digital platforms have until 31st January 2025 to give notice to HMRC that they’re subject to the reporting obligations. From then, each platform must send data annually to HMRC by 31st January each year.

If digital platforms send inaccurate, incomplete or unverified data, they may also face fines and penalties.

I sometimes sell things online? Will I be affected?

The new changes are designed to identify people who are not declaring sustained income gained via digital platforms.

If you sometimes sell off a few unwanted items via eBay or another platform, the new online sales tax rules are unlikely to affect you. There’s an ‘occasional seller’ exclusion that applies if you make fewer than 30 sales in a year and you received no more than about £1,700 (€2,000).

Additionally, you’re entitled to a £1,000 trading allowance per tax year. If you earn less than £1,000 from trading activities, you don’t need to report them to HMRC.

I haven’t declared income from digital platforms. What do I do?

If you’ve earned income from digital platforms and now declared it via Self-Assessment, the new online sales tax rules could catch you out. Unfortunately, if HMRC finds you have undeclared income, it’s likely to pursue you for it.

If you are in this position, it’s vital you get expert advice. Our expert accountants may be able to help you minimise any penalties you pay. They can do this by talking to HMRC ahead of any potential investigation. To learn more, get in touch with the THP team today.

Avatar for Mark Ingle
About Mark Ingle

Owner-manager business specialist, Mark Ingle is key to building relationships with clients at the Chelmsford office. “I like to see clients enterprises grow and succeed.” Mark explains, “The team here has a lot to offer and I can see a lot of new businesses responding to that.”

Having worked for accountancy practices in London and Essex, Mark has worked with a range of companies varying in size. For Mark, THP stands out for its “local firm approach with the resources of a larger practice.”

Although a keen traveller, Mark is focused on giving his clients at THP the highest service, “Right now, I aim to help the clients we have to the best of my ability which will help me attract more of the right clients in the future.”

Mark’s specialist skills:

  • Annual and Management Accounts
  • Tax and VAT
  • Strategy and Business Planning
  • Marketing and Sales
  • Business Development
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