eBay, Vinted and Etsy sellers warned they might be hit with tax invoice

Bargain hunters and side-hustlers flogging items on eBay, Vinted, and Etsy could be heading for a tax nightmare. They’ve been slapped with a severe alert about a ‘ticking time-bomb’ that could leave them out of pocket.

A looming change in the tax laws set for January has triggered dire warnings from a tax charity about “chaos and confusion”. What’s more, there are fears people haven’t got a clue about the purse-pinching peril ahead.

Sellers who rake in anything over a grand through online sales need to watch their backs is the basic message. Sell too much and you could be hit with a tax bill if you’re classed as a pro seller.

Once January arrives, any digital marketplace seller pulling in more than £1,000 will have to deal with a tax return to find out if the taxman’s going to take a slice. Ouch.

Some are fuming. The Low Income Tax Reform Group (LTRG) are up in arms.

They’re pointing fingers at HMRC for not getting the word out to e-sellers about the incoming headache of tax returns. To make things worse, they say nobody’s clear on the fine print or deadlines involved.

Come 2025, web platforms will be providing reports on sales income and transactions to both users and the taxman based on calendar years not fiscal ones. That’s a move that’s going to muddle up everyone’s sums, according to LTRG boffins.

Under new global regulations, online platforms must now gather and report data to the tax authorities on earnings from those renting out properties, offering transport, or personal services. This affects even individuals flogging goods who pocket more than €2,000 or carry out upwards of 30 sales yearly, reports the Mirror.

With the UK onboard with these rules, digital marketplaces are now tasked with collecting details like sellers’ full names, home address, birth date, National Insurance digits, and even VAT numbers if they’re up for grabs. And they need to give info on the total sums paid to the seller for that year, the number of transactions, any fees, commissions, or taxes by the platform, and bank account details on where the money’s been sent.

The LITRG are now nudging the government and HMRC to sort out the mess and push online platforms to write down seller info in a standard format. The tax gurus say: “Those in the gig economy are more likely to be young, migrant and have little experience of the tax system. They are probably unable to afford professional tax advice or assistance. As a matter of economic reality, they may face real difficulties in understanding and dealing with their taxes.

“HMRC have not adequately supported this group – neither enabling nor empowering them to be compliant. An opportunity for the government to intervene to raise sellers’ awareness of their tax obligations, and support them to fill in their tax returns correctly, is coming up. From 31 January 2025, certain sellers using online platforms should be sent information about the amount of income earned on the platform in the preceding calendar year, broken down on a quarterly basis.

“However the current requirements on online platforms in this regard are minimal. As a consequence we think there is a significant chance the information may be indigestible, which will result in the information being confusing or even unread/unactioned.”

There was widespread confusion when the changes to the rules were announced as many sellers mistakenly believed a new tax had been introduced when it is only the reporting rules that have changed. An HMRC spokesman says: “We’ve recently published and promoted guidance for online sellers and we run an extensive Self Assessment campaign every year, which reminds people to check if they need to file a tax return.”