Side Hustle – Understanding the New UK Rules for Online Selling Effective from 1st January 2024 

What the New Rules Entail as part of the revised guidelines  The digital marketplace is set for a transformation in the UK with the introduction of new rules for online selling, effective from the 1st of January 2024. This change heralds a significant update to the tax obligations for individuals and businesses engaging in e-commerce.  Definition […]

What the New Rules Entail as part of the revised guidelines 

The digital marketplace is set for a transformation in the UK with the introduction of new rules for online selling, effective from the 1st of January 2024. This change heralds a significant update to the tax obligations for individuals and businesses engaging in e-commerce. 

Definition of Online Marketplaces: 

Any digital platform, such as websites or mobile apps that facilitate the sale of goods and services, falls under the category of an online marketplace. 

Reporting Requirements: 

From January 2024, these digital platforms are mandated to gather and report income and seller information to HM Revenue & Customs (HMRC). The first reports are due by January 2025. 

International Standards: 

The reporting rules align with an internationally agreed framework, ensuring that digital platforms disclose specific details to the tax authorities. 

Access to Data: 

Sellers operating on these platforms will receive a copy of the reported information, which can be instrumental in verifying income and expenses, ultimately aiding in the accurate assessment of tax liabilities. 

Impact on Sellers: 

The delineation between personal and business sales becomes crucial under these new regulations: 

Casual Sellers: 

If you sporadically sell items online that have been gathering dust in your home, you’re unlikely to face tax charges. 

Regular Traders: 

If your online activities include buying for resale or manufacturing goods with the intent to sell at a profit, you will be considered trading, and your profits will be taxable. 

Income Allowance: 

There is a sliver of relief for small-scale traders. If your total income from online sales, before expenses, is less than £1,000 within any tax year, you will not need to report to HMRC or pay tax on these profits, thanks to the Trading and Miscellaneous Income Allowance. 

VAT Considerations for Online Selling 

In addition to income tax implications, VAT plays a crucial role in e-commerce. 

Navigating VAT for Online Sales:  

As you manage your online sales, keep a vigilant eye on your VAT responsibilities. If your business’s sales exceed the VAT threshold of £85,000 within a rolling 12 month period or are expected to in the next 30 days, you must register for UK VAT, apply VAT to your sales, and remit the collected amount to HMRC.  

When it comes to international sales, different rules may apply. Goods sent to customers outside the UK are zero rated from a UK VAT perspective. This means no VAT is due, but it is still a taxable supply and will still count towards your VAT registration threshold.  

Selling goods to overseas customers may result in the customer being liable to import VAT in their country. This can make for a bad customer experience. However, it is possible to VAT register under the Import One Stop Shop to prevent the customer being liable for import VAT in the EU. 

Looking Ahead 

Sellers must prepare for these changes by familiarising themselves with the requirements and possibly adjusting their accounting practices to ensure compliance. 

For individuals and businesses engaged in online selling, the upcoming changes underscore the need to keep meticulous records and remain cognisant of their VAT and Tax obligations in the digital marketplace. As the January 2024 date approaches, it’s advisable to consult with a VAT/Tax professional to navigate this transition effectively. 

Our Experts in VAT and Tax can guide you to the right path. 

Feel free to contact us with any queries you may have. 

jane@deeksvat.co.uk 

07710553831 

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