Gen Z has bet big on side hustles as they look for new ways to generate extra cash as the cost of living continues to rise. But while online platforms like Vinted, Depop, and eBay have exploded with sales, these off-the-books earnings will soon owe a slice to the taxman.
Britain’s tax body, HM Revenue & Customs, has told online and app retailers they'll need to divulge the income of users on their platforms beginning Jan. 1—irrespective of whether individuals are selling clothes on Depop or room rentals on Airbnb.
The new law also applies to sellers who don’t declare their income from online sales, subjecting them to HMRC’s crackdown if they're discovered via disclosures from the platform. The rule applies to individuals who make more than £1,000 a year in income through online platforms.
Previously HMRC was able to request specific information from U.K.-based online operators on an ad hoc basis; the new system will make the availability of this information more uniform internationally. Firms will have to report information at the end of January 2025.
“These new rules will support our work to help online sellers get their tax right first time. They will also help us detect any deliberate noncompliance, ensuring a level playing field for all taxpayers,” an HMRC spokesperson told Fortune in an email.
How might this impact online sellers?
Gen Zers, the oldest of whom will turn 27 in 2024, have enjoyed side hustles as a way to create an additional stream of income which many have come to rely on. However, even if online sales aren't regular earnings, HMRC suggests individuals use its self-assessment tool to be sure.
This could mean the ramifications of the new law may only impact a select few sellers, Vinted’s chief executive Adam Jay told the BBC.
"It's actually quite a small proportion of users of our platform who will trigger this threshold where we need to provide information," he said. "It's only those people who are making a profit from selling second-hand items that might be eligible for tax and then it's about their own personal tax situation what tax would ultimately be due to HMRC."
What kind of data will be shared?
Websites will now collect personal information about sellers and what they’ve earned, as well as the fees they have been charged on the platform. This law, which follows what the international body Organisation for Economic Cooperation and Development (OECD) set out, will aid global efforts to fight tax evasion.
“The information provided to HMRC should make it easier to detect those who are either mistakenly not declaring what they should, or those seeking to evade tax,” Dawn Register, head of tax dispute resolution at British accounting firm BDO, told the Guardian. “It will therefore be even more important for taxpayers to ensure they are accurately reporting their income from all sources.”
If sellers are already paying taxes on their sales, the won’t have to report additional information.
