Digital platform FAQs

Q. What is a digital platform?

A digital or online platform is a platform that connects sellers to customers to supply goods or services. Under new rules, digital platforms will need to start reporting customer data to HMRC. The following gives some examples of online marketplaces and platforms that will be captured by the new reporting rules:

• Online market places e.g. eBay, Vinted, Etsy, Depop, Amazon   
• Property rental sites e.g. AirBnB
• Parking rental sites e.g. Your Parking Space
• Food delivery drivers e.g. Deliveroo, Uber Eats, Just Eat
• Taxi drivers e.g. Uber, Bolt
• Private tutor websites e.g. Tutorful, Superprof
• Content creators e.g. Substack, Onlyfans, Twitch, Patreon, YouTube
• Social media influencers e.g. TikTok, Instagram, X (Twitter)
• Pet sitting sites e.g. Pawshake, Rover, TrustedHousesitters

This list is not exhaustive.

Q. What are the new rules about digital platforms? Is this a new tax?

There is no new ‘side hustle’ tax. The new rules are that for the first time digital platforms will be required to report certain data to HMRC on an annual basis, by 31 January in respect of the previous calendar year. Digital platforms are obliged to report your details if you:

• Make more than 30 sales in a calendar year, or
• Receive more than 2,000 euros (approximately £1,700) for those sales.

It has always been the taxpayer’s responsibility to report any taxable income and profits to HMRC and, where applicable, pay any associated tax. This will turn on the level of income received and whether the taxpayer is trading, see ‘Am I really trading?’ for further details. Where the income may have been below HMRC’s radar in the past, taxpayers will now be at risk of being contacted by HMRC if they have not already registered with HMRC to file tax returns.

If you have been selling goods or services through digital platforms and have not yet brought your tax affairs up to date, it is in your best interests to do so before HMRC write to you, as you will potentially incur greater financial penalties when a disclosure is ‘prompted’ by HMRC first.

Q. I have received an email from a digital platform telling me they’re going to share my details with HMRC, what does that mean?

Where a digital platform is required to report your data, this information will include your full name, home address, date of birth, and a tax identification number – this will be your National Insurance Number if you live in the UK. The information reported will be different if you’re using a company, partnership, trust or charity to make sales through digital platforms. Alongside your personal information, the platforms will report the sales you have made throughout the year to HMRC.

If your information is reported to HMRC, you may later receive correspondence from HMRC who may believe you have undeclared income and tax to pay. If you have been making more than £1,000 in income in a tax year, seek professional advice if you are unsure whether you need to report your income or not.

Q. I have received a letter from HMRC about digital platform sales, what should I do?

The important thing is not to ignore an HMRC letter. There will usually be a 30 day deadline to respond, during which you will need to work out if you have any unreported income and any tax to pay. If you think you do need to disclose your income, you may need to make a voluntary disclosure and/or register to file a self assessment tax return. If you do not think you have anything to declare, we recommend still responding to HMRC’s letter to explain why you don’t need to disclose anything.

It’s important to remember that, although HMRC’s letter will be in respect of income reported by the online platform you used in the past calendar year, if you have been earning income from online sales before 2024 you will need to disclose historic activity as well, within the time limits that HMRC can assess.

We discuss nudge letters further in our articles, as well as more information about voluntary disclosures too.

Q. Am I really trading?

Whether you are trading or not may not be immediately obvious. If you are operating a trade, you may owe income tax and NICs on your profits. We discuss the ‘badges of trade’ in more detail. Whether you are trading does not depend on any one factor, but HMRC will take a rounded look at your activity.

If you are simply selling second hand goods you no longer want, then it is unlikely that you’ll be trading. In this case you may have no ongoing tax obligations, but if HMRC write to you, you will need to write back to explain what you are selling and therefore why there is no tax to pay.

Whether you are engaging in just a hobby compared to a trade can be subjective. We recommend seeking tax advice if you are not sure whether your activity amounts to a trade or not in the eyes of HMRC.

Q. What if I cannot afford to pay the tax due to HMRC?

If following a disclosure to HMRC you have liabilities due to HMRC that you will be unable to pay in one go, a ‘Time to Pay’ arrangement can be made with HMRC to pay in instalments. Generally these can be made for up to 12 months with relative ease, but for longer agreements you may need to provide additional information about your personal circumstances to HMRC.

Q. How do I calculate what is due to HMRC?

First you will need to be able to calculate your profit or loss from your sales. A tax adviser will be able to advise on what expenses you can and cannot claim against the income you have earned through the digital platform.

Calculating the tax due will depend on your personal circumstances as you will need to look at your total income for a tax year in order to calculate additional tax that may be due on any sales through digital platforms. You will also need to consider whether you owe any Class 2 or Class 4 NICs on your profits, as they are treated as self employed profits.

Where you are disclosing historic liabilities, you will incur late payment interest on any underpaid tax, and you may be charged financial penalties. The level of the penalty depends on multiple factors, but is reduced where you have notified HMRC before they have notified you i.e. the disclosure is ‘unprompted’, which is why it is important to bring your tax affairs up to date as soon as possible, and do not wait for HMRC to contact you first. A specialist disclosure adviser will be able to mitigate penalties as far as possible for you, and advise on the total liabilities that will be due to HMRC.

Q. What do I need to disclose to HMRC?

If you are trading and earn more than £1,000 income (not profits) in a tax year, you need to disclose your income to HMRC. How you need to disclose this depends on whether it’s just the most recent tax year, or whether you have historic income to repot as well.

If you are only just starting to earn money, you may only need to register to file self assessment tax returns on an ongoing basis. You must register with HMRC by 5 October following the tax year (6 April to 5 April) where you first earned more than £1,000 in income, and file a tax return by the following 31 January.

If you have been earning income historically of more than £1,000 per tax year, you may need to make a voluntary disclosure to HMRC. How many years you need to declare depend on whether your activity has been wholly in the UK, whether you have filed tax returns or not, and the underlying behaviour (did you take reasonable care, for example, or did you deliberately omit any income).

In more serious cases where income has been deliberately under-declared to HMRC, you may need to consider using the Contractual Disclosure Facility (or Code of Practice 9 / COP9).