Around eight million people in the UK run an online business – but many are still unaware they should be paying tax on their earnings.
Last year, HM Revenue and Customs sent out more than 30,000 letters as part of a campaign targeting traders and those selling goods online. Websites including eBay and Amazon were also contacted and asked to provide members’ details. Although the HMRC drive principally looked at those who sell goods as a business, rather than people who occasionally trade small amounts of personal items, it has so far raised more than £650,000 for the tax office.
The new personal tax income threshold is £9,440 and research by Direct Line for Business states a “significant” number of people selling online are not aware they qualify as a business and therefore need to pay tax on income generated. This tax should be paid regardless of whether or not online selling is supplementary income.
According to the research, eight million home businesses equates to about one in six people. Of those, 5.2 million are buying items to sell at a profit and 2.8m are selling homemade wares such as cards and candles. It also states the top five per cent of people with businesses on eBay and Amazon earn an average of approximately £18,000 every year.
Jazz Gakhal, head of Direct Line for Business, said: “A large proportion of people clearly don’t view themselves as running a business, despite generating a sizeable turnover selling goods online to be dispatched from their home. People should check with HMRC if there activities online mean they qualify as running a business.
“We urge people looking to make or sell items from home on a regular basis to organise home business insurance from the start.”
For more information on voluntary disclosure you can call the HMRC helpline on 0845 601 5041.
Previous HMRC campaigns have targeted doctors, coaches and tutors, electricians, plumbers and those with offshore bank accounts. All the campaigns launched so far have raised £547m from voluntary disclosures, and nearly £140m from further investigations.
According to the Office of National Statistics, a total of 367,000 have become their own boss in the past five years, taking the total to 4.2m. More than 300,000 of those were also over 50. There are also now 345,000 people working for themselves in the over-65s age bracket.