If the answer is yes, then you may need to declare this money for tax purposes by the end of the month. This is because of the latest HMRC online tax crackdown in pursuing those who fail to inform them of such earnings from the “sharing economy”. The big concern is many people appear unaware that the income they generate from these web based transactions is subject to taxation.
The sharing economy refers to websites that allow both buyers and sellers to trade goods and services online. Selling the odd item such as clothes or furniture in one off sales won’t likely require you to pay tax on the proceeds. However, those who sell items regularly or sell a large number in a small space of time may be deemed to be operating as a business and thus generating a profit, for tax purposes.
The concern is that according to Ruth Lythe the Daily Mail, 5 million Britain’s partake in the sharing economy, “selling products such as birthday cards, knitting or jam online, or by offering services – and the number is rising.”
As with so much online these days, everything is trackable. HMRC has a new computer system that compiles information from various marketplace websites such as Just Park. This identifies nonpayers of tax and this latest crackdown could prove quite lucrative for the Exchequer.
HMRC is also likely to receive greater powers very soon whereby they’ll be able to monitor people's online earnings by obtaining records from third-party payment processing firms like Pay Pal. Such a move would force these companies, as well as Apple and Google’s app stores, to identify users who are generating income from online sales.
It is thought that significant sums of tax revenue are lost every year because of undeclared income from online activities. HMRC claim their new powers will allow them to raise £860m over the next 5 years.
Those who are identified as owing tax and failing to declare it in their tax return will face an initial automatic fine of £100. You can find further details of how these fines work in this post, revealing the penalties for missing your self assessment tax return deadline.
Rules are set to be applied whereby online marketplace sellers will be able to earn £1,000 via a new trading allowance before having to declare anything to the taxman. In the meantime if you’ve earned income from these transactions above £10,600, then this needs to be declared in your tax return and you have until 31 January to submit this information.
The content of this post is up to date and relevant as at 19/01/2017.
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