What is the new guidance from HMRC?
HMRC has published new guidance for taxpayers who regularly sell goods or services through an online marketplace. The guidance clarifies that this activity could be treated as a ‘trade’ for UK tax purposes. If this is the case, taxpayers may need to pay the income tax they earn from buying and selling goods as a trade or business using online marketplaces such as eBay.
Do I need to pay tax on the sale of personal items?
Many people are currently uncertain about the new regulations regarding the sale of goods online. Selling goods online refers to small businesses that sell products through online retailers like Amazon, eBay, Etsy, and other online marketplaces. It's essential for taxpayers to know that they have the right to sell their unwanted personal items without paying capital gains tax on the earnings from the sale of these items.
If taxpayers are just selling unwanted items, such as the contents of a loft or garage, it is unlikely that they will have to pay tax. However, if they buy goods for resale or make goods to sell them for a profit, they are likely to be trading and will have to pay tax on their earnings.
Tax allowances for selling your personal items
There is also a £1,000 tax allowance for miscellaneous trading income. This is known as the Trading and Miscellaneous Income Allowance. Where this £1,000 allowance covers all the individual’s relevant income (before expenses), the income is tax-free and does not have to be declared to HMRC.
What details will digital platforms share with HMRC
Traders should note that since 1 January 2024, online marketplaces must collect and report seller information and income to HMRC. These digital platforms must report sellers’ income by January 2025. The changes are an internationally agreed set of rules for Online marketplaces to report certain information to HMRC.
If you have trading income from selling goods online, you must register to pay a self-assessment tax return.
Contact Us
If you are selling goods and are unsure if it will result in you needing to complete a self-assessment tax return or you’re an online seller and need support in completing a self-assessment tax return, contact our dedicated tax team today.