Most of us have bought or sold items on eBay, Etsy, Vinted, eBay and other online marketplaces but when does occasional online buying and selling turn into trading? And when do you have to register as a trader with HMRC and pay tax on the money you make selling items online?
The rules changed on 1 January 2024. Since then, online ecommerce platforms, including Etsy, eBay, Vinted and AirBnB have been required to share details of the traders using their sites and the income those users have made with HMRC (although not until the end of January 2025). This will allow HMRC to look for discrepancies between the earnings reported via a self assessment tax return and the ecommerce site.
Any website in a location signed up to rules set out by the Organisation for Economic Co-operation and Development will collect information on UK sellers and share it with HMRC. Most ecommerce marketplaces are affected, and they could be fined if they fail to provide information about sellers. The first reporting deadline for online marketplaces is 31 January 2025. The data will cover all sales made in 2024.
Do the rules apply to all online sales?
Anyone who earns over the £1,000 trading allowance during a tax year is required to declare their earnings to HMRC. This is also the case if you sell items bought specifically to resell, made to sell, or sold for other people via ecommerce sites and marketplaces such as eBay, Etsy and Vinted.
However, some online sales will not be liable to tax:
- UK residents earning less than £1,000 in a tax year (known as the Trading Allowance) will not pay tax.
- Anyone renting out a room in their own house on AirBnB can earn up to £7,500 a year tax-free under the rent-a-room scheme.
- Anyone selling personal belongings, such as second-hand clothes, toys, books or gadgets, will not pay tax.
Selling items with the express purpose of earning an income is recognised by HMRC as self employment – whether that is online, at a car boot sale or at a local market. Any money you receive must be declared once your income exceeds of £1,000 via self assessment. You should register for self assessment with HMRC and submit a self assessment tax return and pay any tax owing.
I've sold my stuff online. Do I have to pay tax?
If you're having a clear-out of clutter at home, you don't have to pay tax on the items you sell on online platforms such as eBay, Vinted, Depop or Facebook Marketplace. Even if your clutter sells for quite a lot - as far as HMRC is concerned, you only have to pay tax on items you buy to sell on for a profit, items you make to sell, or items you sell for other people.
Anything you sell that is yours - for instance, your children’s old clothes or toys or items you have used or items you bought by accident - is not taxable. Neither do you need to register for self assessment or report your income.
The moment you buy, make or take anything with the intention of selling it, you are a business and must register with HMRC as a business. You can choose to be self-employed or a limited company.
If you are both a private seller and business seller, you should use separate online profiles or accounts and different bank accounts to keep your personal and business seller accounts and income separate.
Will my online sales be reported to HMRC?
It's important to note that your online sales activity is very easy to monitor; the more you sell, the more obvious it is to HMRC that you are using online platforms such as Etsy or eBay to run a business and make a profit. In any event, HMRC has instructed online marketplaces to record and report how much income people are making so that they can investigate and pursue unpaid taxes.
These rules also affect freelance job platforms such as Fiverr, Uber and Deliveroo - sites that have become a popular way to for self-employed people to work in the gig economy.
Is my side hustle income from selling online taxable?
HMRC allows you to earn up to £1,000 from what it describes as "occasional jobs" selling goods and services you provide yourself without having to pay tax on that income. This is called a Trading Allowance. If you earn more than that, you must declare your income and pay tax on it but you are still entitled to a tax exemption of up to £1,000 on income from trading. Once you exceed that threshold, it can be subject to income tax. HMRC has instructed the online marketplace to record how much income people are making and report it. This means that HMRC can then investigate and pursue you for unpaid tax.
Do I need to register for VAT for my online sales?
VAT registration is compulsory for all types of business once you reach the VAT threshold or expect to exceed the VAT taxable turnover of £90,000 (£85,000 prior to 1 April 2024) in any 12-month period.
You need to think about VAT registration if your online turnover, including postage costs to customers, looks as if it might exceed the VAT registration threshold over the year.
There are additional VAT registration requirements by law if you are involved in importing or exporting. VAT registration may be required in other countries depending on the value and type of goods you sell or acquire.
Read official advice on working for yourself on the HMRC pages of the GOV.UK website.
Am I responsible for paying tax on my online sales?
As an online seller, you are responsible for paying any applicable taxes associated with your online sales.
Will I owe capital gains tax on my online sales?
If you sell valuable items on eBay, you may have to pay capital gains tax (CGT) on them. Anything that you sell (apart from your car) that's worth more than £6,000 is liable for CGT – but you only pay capital gains tax on the profit.