In the ever-evolving world of online marketplaces, the recent HMRC reporting rules have sparked a wave of confusion. Let’s dissect these changes, especially for selling on platforms like Vinted and eBay, and what they truly mean for you as a seller.
Contrary to widespread concern, the new HMRC rules target the platforms, not the sellers. These platforms are now obligated to report users’ earnings when they exceed certain limits: more than 30 sales or earning over £1,700 annually.
What are the rules for sellers?
For you, the seller, the guidelines haven’t changed, there has always been an obligation to report your earnings from trading.
Here’s what you need to know as a seller:
- If your side hustle brings in less than £1,000 annually, there’s no need to declare this income in a tax return.
- Over £1,000? Then, consider if your activities constitute ‘trading’, necessitating a tax return.
Blog Suggestion: When should I register for self assessment?
I’m self employed, do I need to pay tax on items I sell online?
If you are self employed and therefore already completing a self assessment tax return, the £1,000 trading allowance may already be being used for your self employed income, but this doesn’t necessarily mean you have to now pay tax on every little thing you sell online.
The key is in determining if you are classed as ‘trading’ or not.
Blog suggestion: What is the trading allowance?
How do I determine if I am classed as ‘trading’?
You’re likely ‘trading’ if you:
- Regularly sell items for profit.
- Create and sell products, like upcycled furniture.
- Engage in consistent sales activities.
- Earn commission from selling others’ items.
- Receive payment for provided services.
Here are some examples
Let’s say you’ve purchased an old dresser, you’ve then upcycled it and sold it. If this is a one-off project, it’s not usually considered trading. However, if you regularly purchase, refurbish, and sell furniture for profit, this is likely viewed as trading by HMRC.
Or another example, if you are selling your family’s pre-loved clothes because they are no longer needed then you are not going to be classed as trading as the intent isn’t in buying and selling.
However if you are buying items at a reduced cost with the intention of selling them on, then you are classed as trading and will need to declare the income on your tax return.
Make sure you’re on the right side of tax law
It’s clear that the new HMRC regulations are more about platform accountability and ensuring that those trading aren’t dodging tax than changing the game for casual sellers.
If your online sales are just a way to declutter, these rules shouldn’t weigh heavy on your mind. But, for those who are scaling their sales into a more regular, profit-oriented venture, staying informed about these tax nuances is crucial.
It’s all about finding that sweet spot – where you can sell with confidence, knowing you’re on the right side of tax laws.
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