HM Revenue and Customs (HMRC) has flagged nearly four million online sellers following a major rule change, as it prepares to tighten enforcement on undeclared income.
New data shows HMRC collected information on 3.99 million sellers last year, a sharp increase from 1.5 million the previous year. The rise follows new reporting requirements introduced in 2024 for online platforms.
Under the rules, websites such as eBay, Vinted and Etsy must share details of users who earn more than £1,700 annually or complete over 30 sales.
Value of Online Sales Doubles
The scale of activity being tracked has surged significantly. The total value of reported sales more than doubled from £25.5 billion to £54.8 billion within a year.
This rapid growth highlights the expanding role of online marketplaces in the UK economy and the increasing number of individuals generating income through digital platforms.
HMRC now has access to a far broader dataset, giving it greater visibility over transactions that may previously have gone unreported.
Enforcement Systems Near Completion
Despite collecting vast amounts of data, HMRC has admitted it is not yet able to issue fines directly using the new information. Current systems still require manual processing, limiting immediate enforcement.
However, officials say upgraded systems are in the “final stages of development” and will soon allow the department to analyse data more efficiently and begin compliance action.
Experts believe this marks a turning point, with enforcement expected to increase significantly once the systems are fully operational.
Experts Call Data a ‘Game-Changer’
Tax specialists say the new reporting framework could transform HMRC’s ability to identify undeclared income. Dawn Register, a tax dispute resolution partner at BDO, described the dataset as a “goldmine” for tax inspectors.
She said it represents an “absolute game-changer” in ensuring online sellers pay the correct amount of tax, particularly those operating at a scale similar to small businesses.
The increased scrutiny is likely to affect individuals who regularly buy or produce goods for resale through online platforms.
Who Needs to Pay Tax on Online Sales?
Under existing rules, individuals must pay tax if they earn more than £1,000 in a tax year from trading activities. This includes selling items for profit, whether handmade or purchased for resale.
HMRC has emphasised that casual sellers are not affected. People selling unwanted personal items for less than they originally paid do not need to pay tax.
The focus is instead on individuals effectively running businesses through online marketplaces without declaring their income properly.
HMRC Urges Sellers to Stay Compliant
An HMRC spokesperson stressed that the rules themselves have not changed, but enforcement is becoming more robust. Anyone who owes tax must register for Self Assessment and submit a return.
With millions of sellers now on HMRC’s radar and new systems nearing completion, experts warn that those who have not declared their earnings could soon face investigations, penalties and backdated tax bills.
