Starting from 1 January 2024, significant changes are taking place in the United Kingdom’s tax landscape, resulting from the UK’s commitment to the Organisation for Economic Cooperation and Development (OECD).
This commitment marks a pivotal moment in the global fight against tax evasion and aims to ensure that individuals and businesses pay their fair share of taxes.
The key development starting from this year is the increased obligation for online-based operators to share financial information with HM Revenue & Customs (HMRC).
Find out more about the new tax updates for digital platforms below.
New Tax Report Requirements for Digital Platforms
Previously, HMRC could request financial information from operators based within the UK. However, the involvement of the OECD signifies a broader international effort to address tax evasion comprehensively. This shift in approach is essential to curb tax evasion and ensure that everyone contributes their due share of tax payments.
Under the new rules, digital platforms like Airbnb, Deliveroo, eBay, Etsy, and Vinted are now mandated to report the income generated by sellers on their platforms. This reporting requirement extends to various types of income sources, including the sale of goods, handmade products, second-hand clothing, and services like food delivery and short-term accommodation rentals.
By doing so, HMRC aims to create a transparent ecosystem that enables them to monitor and assess taxable income accurately.
How Will HMRC Review Digital Platform Tax from January 2024?
In response to these changes, HMRC is making substantial investments, dedicating significant resources, and recruiting staff with expertise in tax enforcement. Their objective is to rigorously enforce these new measures and crack down on individuals and businesses that engage in tax avoidance or evasion.
To achieve this, HMRC will utilise the data obtained from these online platforms and cross-reference it with taxpayers’ Self-Assessment information. This process will enable them to identify and address any discrepancies or irregularities in reported income.
Will the New Tax Laws Affect You?
It’s important to note that individuals who earn more than £1,000 per year in additional income from their online “side hustle” are subject to specific tax regulations. This threshold is known as the Trading Allowance. Those who exceed this allowance should register with HMRC as self-employed and fulfil their tax obligations accordingly.
If you suspect that your online side income exceeds the £1,000 Trading Allowance, it is advisable to proactively reach out to HMRC or seek assistance from a qualified tax advisor. These professionals can provide guidance on the appropriate course of action and offer solutions to help you comply with the new tax rules.
Staying informed and proactive is key to ensuring that you remain on the right side of these tax regulations and avoid any potential penalties or legal consequences. Need some financial advice? Get in touch with the accounting experts at TFMC on 0330 135 5996 or fill out our contact form.