A HUGE change is coming in weeks from anyone who sells clothes or other items on Vinted or Depop.
From the New Year HMRC will be cracking down on people who earn extra income through various side hustles.
Whether you rent out your tech on Fat Llama, drive for Uber or freelance on Fiverr – your income will soon be reported directly to HMRC.
It's all part of a wider tax crackdown from HMRC on people boosting their income via side hustles.
This also includes millions of people who sell their clothes online too.
Platforms like Depop and Vinted have really soared in popularity in recent years as an easy way to earn some extra money.
READ MORE IN MONEY
What is income tax and how does the personal allowance affect your wages?
Eight tips to fill in your self-assessment tax return and avoid £100 fine
With Christmas just around the corner and sellers likely to list hundreds of unwanted presents, it's important to know how the changes may affect you.
The new system could slap sellers with an unexpected tax bill if they don't comply with all the necessary tax regulations.
From January 1, HM Revenue and Customs will direct these platforms to record how much money people make by listing their services on them.
From January, those with a side hustle will still be expected to fill in a tax return and pay what they owe the HMRC every year.
Most read in Money
Fast food chain run by Asda owners SOLD to KFC affecting 218 locations
Thousands of households to get £125 paid into bank accounts before Christmas
Our home was destroyed after my son’s ‘ticking time bomb’ Xmas gift exploded
Martin Lewis warns MILLIONS could be owed money – and explains how to reclaim it
But, the taxman will also go directly to these platforms, who will become responsible for recording this information and handing it over to HMRC
HMRC will then be able to use this data as well as any submitted tax returns to work out if there are any discrepancies.
It previously said it would invest £36.69million in this initiative and employ 24 full-time staff to launch and enforce the measures, which aim to "bear down on detect and tackle tax evasion".
Miruna Constantin, tax manager at accountancy group RSM, warned sellers: "It’s never been easier to sell on that ugly festive jumper or garish socks with online platforms like Vinted.
"However, it’s important to understand the tax rules or they could get a costly shock from HMRC in the future."
The measures will also affect those renting out properties on Airbnb and other property rental platforms, or selling other services online.
Miruna added: "These platforms have been warned to brace themselves against landing in hot water with HMRC."
The first reporting deadline for the sites will be one year after the rules are introduced, on January 31, 2025.
In order to meet the strict requirements must bring in new ways of collecting seller details to pass on to HMRC in the correct format.
The taxman will then verify it against its own records to make sure individuals are correctly reporting their income on their tax returns.
"There will be hefty fines and penalties for failing to submit reports or submitting 'inaccurate, incomplete, unverified sellers’ records' so the platforms will be incentivised to ensure they meet their reporting obligations," Miruna warned.
If you know you don't sell very often don't worry, if you make no more than £1,700 for fewer than 30 sales in a reporting period, information is not required to be provided to HMRC.
However, that doesn’t mean you do not have any tax reporting obligations, Miruna warned.
She said: "If you have a profit-seeking motive, for example, buying premium items from outlets to sell at a profit online, your little side hustle might be seen as trading."
The number of transactions you make, or the nature of the assets you sell, will also determine your tax position.
"You may need still to file a self-assessment tax return with HMRC and pay income tax and National Insurance contributions paid accordingly," she warned.
It can be complicated for those who may not be aware of the ins and outs of the tax process, or who only sell items online occasionally.
A simple rule of thumb is if you make £1,000 or more in a year in sales, you'll need to consider whether a tax return is required.
Miruna said: "The good news is, the information collected by platforms must be shared with HMRC as well as with sellers, which should help taxpayers get their affairs right.
"However, it can come as a surprise to many individuals, leading them to prepare tax returns for the first time and make some think twice about that wardrobe spring clean."
How do you know if you need to submit a tax return?
Self-assessment is a system HMRC uses to collect income tax.
Tax is usually deducted automatically from wages, pensions and savings, but people and businesses with other incomes must report it in a tax return.
This applies to the following:
- Your income from self-employment was more than £1,000
- Earned more than £2,500 from renting out property
- You or your partner received high income child benefits and either of you had an annual income of more than £50,000
- Received more than £2,500 in other untaxed income, for example from tips or commission
- Are limited company directors
- Are shareholders
- Are employees claiming expenses in excess of £2,500
- Have an annual income over £100,000
Before you can complete and submit your tax return, you'll need to have a so-called unique taxpayer reference (UTR) and activation code from HMRC.
This can take a while to receive, so if it's the first time you're completing a self-assessment, make sure you register online immediately and ask HMRC for advice.
To sign in or register visit the "Self Assessment tax return" section of HMRC's website.
If you've already signed up for self-assessment, you can find your UTR in relevant letters and emails from HMRC.
HMRC accepts your payment on the date you make it, not the date it reaches its account – including on weekends.
The deadline for filing your self-assessment tax return by post is October 31.
If you miss the deadline by up to three months you will be charged a £100 penalty.
If you miss the deadline by over three months you will be charged more on top of this.
But don't worry as if you don't send your paper form on time, you can fill out your tax return online.
You have to do by January 31, 2024.
If you need to change your tax return after you've filed it, you can do so within 12 months of the original deadline or you can write to HMRC for any changes after that.
Filling in your tax return can seem daunting, but with our step-by-step guide you'll have it sorted in no time.
How much can I be fined for filing my taxes late?
Late filing fees are pretty steep, so make sure you get your self-assessment return in before January 31.
According to HMRC, you'll get a £100 fine for failing to file your return a single day after the deadline.
Then, a £10 daily fine applies every day you don't submit your tax return.
This is capped at 90 days – or £900.
So on top of the initial £100 fee, a £1,000 maximum late filing fine applies.
If you're six months late, there's a further £300 fine or 5% of the money you owe – whichever is higher.
That's on top of the daily £10 charges built up so far, so there's no shortcut to a smaller payment once you're late.
And after 12 months, another £300 or 5% fine applies.
Interest is also added on top of this.
If you deliberately haven't filed your tax return, a fine of up to 100% of the tax due could then be sent too.
Read more on The Sun
Devastated pals pay tribute as much-loved talkSPORT commentator dies aged 45
Just DAYS left for hundreds of thousands to claim 'lifeline' £300 cash
Meanwhile, people are only just realising that their side hustle could land them with an unexpected bill.
Plus, here is the full list of jobs at risk of paying higher rate tax – and it’s not the professions you think.
You can also join our new Sun Money Facebook group to share stories and tips and engage with the consumer team and other group members.
Source: Read Full Article