Year-End & Cash Flow

Sharing economy users face fines for self-assessment tax failure

Fred Heritage | 30 January 2017 | 7 years ago

airbnb
Users of Airbnb could be considered self-employed traders by HMRC
Anyone who rents property on sites like Airbnb, or regularly sells items online via marketplaces like eBay or Gumtree, should check whether they meet HMRC’s badges of trade? specifications to avoid fines, ahead of the 2017 self-assessment tax deadline.

Set for midnight on 31 January, the deadline could bypass micro business owners who regularly use online marketplaces to supplement their income, and who don’t realise they need to be paying tax, accounting firm FreeAgent has warned.

HMRC look at a range of factors to determine whether an individual is trading? or not, and the rise of the UK sharing economy could mean many people arent clear whether their income is taxable.

If money earned on the side? is taxable, individuals will need to register for self-assessment and file their tax return before midnight on 31 January 2017, or else receive a 100 fine and risk further penalties.

Failing to register for self-assessment could result in huge costs to taxpayers. Last year, 870, 000 people across the country failed to submit their tax return before 31 January, and were immediately slapped with an automatic 100 fine.

with the increase in the number of people making regular sales on sites like eBay and Gumtree as well as renting out property onairbnb many people are making moneyoutsidetheir usual work, explained FreeAgent CEO, Ed Molyneux.

by reviewing any on the side? cash you accumulate against HMRC’s badges of trade, youll be able to tell whether you need to register for self-assessment and file a tax return and avoid any nasty surprises from the taxman in the future.

People who occasionally sell items through eBay or put their property up on Airbnb are not classed as trading by HMRC, and therefore do not have to pay any tax on money received from selling using these methods.

However, it is likely that people whove sold goods and services frequently via these methods in the last 12 months will be considered a self-employed trader by HMRC and will need to pay income tax and national insurance on any profits made.

The UK tax authority has produced a list of nine badges of trade? it looks for to decide whether someone is actively trading. FreeAgent has confirmed that HMRC look at the whole picture, considering each badge listed below, to determine an individual’s trading? status.

RBS and NatWest to provide accounting software for small businesses.

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