The Information Commissioner's Office (ICO) has launched a new code of practice to advise companies and individuals about what they can do with personal data online.
Based around the Data Protection Act 1998 (DPA), the new document, which is less than 50 pages long, also encourages firms to be more transparent with how they use people's data.
Information commissioner Christopher Graham urged organisations to let people know why their personal data is being collected and what is being done with it - a legal requirement of the DPA.
The document, named the personal information online code of practice, also warns of the threat of enforcement action should businesses keep hold of out-of-date information or fail to keep personal information safe.
Companies that follow the good practice tips handed out in the code of practice will enable customers to make informed decisions on signing up to internet-based services, the ICO said.
"Get privacy right and you will retain the trust and confidence of your customers and users; mislead consumers or collect information you don't need and you are likely to diminish customer trust and face enforcement action from the ICO," said Graham.
He also noted individuals can take control themselves by checking privacy settings and being cautious about what content they place online, such as on social networking sites like Facebook.
Yesterday, the Ministry of Justice launched a Call for Evidence asking for opinions on whether the ICO should have stronger powers.
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