Do I have to pay tax on my eBay sales? Question of the week discussion

Q. Do I have to pay tax on my eBay sales?

A.
Selling your own stuff that you don't need anymore, such as cast-off clothing or second-hand stereos, is fine. However, online earnings become taxable when you become a trader, someone who sells goods bought with the intention of selling them, or makes items and sells them for profit.

The difficulty here is when it’s a grey area. If you’re not sure, you may need to take advice from an accountant, yet as a rule of thumb ask, ‘would a reasonable person, who knew the score, say you were trading or just selling your own stuff?’ One thing not to do is lie to the taxman; they have serious powers to investigate and if they do, the stories are nightmares.

Also if you’re a trader then the people who buy from you have full consumer rights (goods must be satisfactory quality, as described, fit for purpose and last a reasonable length of time).

There’s an HMRC guide to help you work out if you need to notify it about income made from online sales. Also see the Ebay Selling guide.

If you'd like to discuss this click reply below.

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Comments

  • soolin
    soolin Posts: 72,116 Ambassador
    Photogenic Name Dropper First Post First Anniversary
    There is a lot of misunderstanding about this, so many times some very odd beliefs get posted. I have come across people who say that 'hobby' sellers aren't trading because they only sell a few bits as a hobby..no such tax relief I'm afraid. I've also seen claims that only new goods being sold attract tax, again wrong otherwise all those second hand book shops and antique shops would be laughing.

    Yes people get caught and HMRC have always said that most people are reported by friends, family or neighbours. If you trade and don't declare it then who knows whether that cousin who is jealous of your income, or that man in the pub who overhears you saying how you buy and sell second hand cars...is going to report you.

    Phone the dedicated HMRC line within 3 months of starting to trade to avoid penalties. They will be helpful, they offer courses if necessary and assist with business ideas if you struggle to work something out in your books. They will also be able to talk you through the National Insurance rules and exemptions and for income of less than £15,000 you really only need the most basic accounts.
    I’m a Forum Ambassador and I support the Forum Team on the eBay, Auctions, Car Boot & Jumble Sales, Boost Your Income, Praise, Vents & Warnings, Overseas Holidays & Travel Planning , UK Holidays, Days Out & Entertainments boards. If you need any help on these boards, do let me know.. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.All views are my own and not the official line of MoneySavingExpert.
  • alfiesmum
    alfiesmum Posts: 1,171 Forumite
    I've been trading on eBay for a year, and I'm actually looking forward to puttng in my first tax return - HOW SAD IS THAT!!??

    If you're buying things with the intention of selling on eBay, you're an earner, and like the rest of us should be paying into the pot.
    I have to confess, when peeps on the board happen to mention they're selling 'about 300 items a month', and then it transpires they have a personal account to do it, so as not to pay tax, it does annoy me a tad actually.
    But! Other people are none of my business, and as long as I know I've nothing to fear, I'm fine. All above board, it feels good.
    If you are trading on eBay, and not declaring it to the tax man, just start from now. It's not as scary as it sounds, nobody is out to get you. It's the ones not paying tax that they're out to get......
    Is it true do you think that the Tax Man has a system on eBay to check someones volume of sales etc to catch people doing it undeclared? I read that somewhere.
    All it takes is a buyer that you've peed off, or a legit seller who wants to cause you some hassle, they take a quick trip to Goofbay, look at your volume of sales, and type up a quickie letter to the tax man. It's not worth it, get yourself registered to pay tax - that's what I say! And then you'll be filling in your three line accounts along with me next April!!

    To answer the question under discussion - I personally don't think there is any confusion as to whether you should be paying tax. The confusion and the myths that Soolin has mentioned (I've heard some of those ones!), are made up by people determined to evade tax. Simple as that. The confusion is not if you should be paying, the confusion is what grounds are you going to plead when you're caught?
  • soolin
    soolin Posts: 72,116 Ambassador
    Photogenic Name Dropper First Post First Anniversary
    There were always rumours that HMRC had a reporting tool on ebay, I believe we have even had links to news items about this in the past.

    However HMRC don't need such a tool as there is a report mentality on ebay and that works for them. Just hang about the seller discussion boards and see how quickly a serious thread turns to cries of 'report to HMRC' or 'I have sent a report to HMRC' to see what I mean. Be quick though as threads disappear very quickly. basically if some asks a question about a seller it is rare that more than a few posts go on before someone starts to question why a seller is using a personal account and yet sells say prams regularly. Or post using your own ID about a rogue buyer and see how quickly someone asks you why you are not properly declared as a business..

    Even on here when we get long threads about rogue sellers there is usually a suggestion and a link on where to report them if they are mis registered.

    Also some other links that people might find useful:

    http://www.theregister.co.uk/2007/02/09/ebay_uk_traders_tax_guidance/
    I’m a Forum Ambassador and I support the Forum Team on the eBay, Auctions, Car Boot & Jumble Sales, Boost Your Income, Praise, Vents & Warnings, Overseas Holidays & Travel Planning , UK Holidays, Days Out & Entertainments boards. If you need any help on these boards, do let me know.. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.All views are my own and not the official line of MoneySavingExpert.
  • soolin
    soolin Posts: 72,116 Ambassador
    Photogenic Name Dropper First Post First Anniversary
    Actually I have found a news link about the alledged reporting tool that HMRC use:

    http://news.bbc.co.uk/1/hi/business/6354003.stm

    The HMRC is not just relying on the hot-line for evidence.
    It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
    "It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman
    I’m a Forum Ambassador and I support the Forum Team on the eBay, Auctions, Car Boot & Jumble Sales, Boost Your Income, Praise, Vents & Warnings, Overseas Holidays & Travel Planning , UK Holidays, Days Out & Entertainments boards. If you need any help on these boards, do let me know.. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.All views are my own and not the official line of MoneySavingExpert.
  • soolin wrote: »
    Actually I have found a news link about the alledged reporting tool that HMRC use:

    http://news.bbc.co.uk/1/hi/business/6354003.stm

    The HMRC is not just relying on the hot-line for evidence.
    It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
    "It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman

    Yeah I think it would be fairly straightforward for HMRC to use something like this to spot non taxpayers. Chances are the system will look for patterns over time particularly type of item and how often. Someone selling 10 DVDs in one month won't ring alarm bells but someone selling 10 DVDs every month for a year might.
    "One thing that is different, and has changed here, is the self-absorption, not just greed. Everybody is in a hurry now and there is a 'the rules don't apply to me' sort of thing." - Bill Bryson
  • rarrarrar
    rarrarrar Posts: 142 Forumite
    First Post First Anniversary Combo Breaker
    Besides Tax, remember if you are selling as a business you must:
    - publish your trading title and a geographical address which can be used for contact
    - abide by the Distance Selling Regs and so offer refunds.
  • alfiesmum
    alfiesmum Posts: 1,171 Forumite
    Definitely offer refunds if you're using Buy It Now format. But if using auction format it's not law.

    Can the address be on the 'me' page? That's where mine is at present.
  • RFW
    RFW Posts: 10,012 Forumite
    Name Dropper First Post Combo Breaker First Anniversary
    soolin wrote: »
    The HMRC is not just relying on the hot-line for evidence.
    It is using a robotic computer software programmes, called Xenon, to scan internet sites like Ebay and look for people making multiple transactions.
    "It is much more efficient than trying to do the same thing manually as we have in the past," said the spokesman
    I have been on the receiving end so can clarify this is true. Although I was registered for Tax and VAT the address held by Ebay was different to my registered Tax address so I was showing as a non payer! HMRC had collated my turnover over a couple of years and made a general enquiry to catch me out if I had supplied them with false info.

    Continuing that topic, its worth noting about VAT, the threshold s currently £68,000 (I think) so anyone taking more than that in any 12 month period (including postage) should be registered.
    .
  • RFW
    RFW Posts: 10,012 Forumite
    Name Dropper First Post Combo Breaker First Anniversary
    rarrarrar wrote: »
    Besides Tax, remember if you are selling as a business you must:
    - publish your trading title and a geographical address which can be used for contact
    - abide by the Distance Selling Regs and so offer refunds.

    Distance selling regulations (as mentioned above) do not apply to auctions. They also (obviously) only apply to goods sent by post or courier and not to collected items.
    There are other exceptions for refunding by DSR, but generally refunds should be offered.

    Address/contact details are fine on the 'about me' page.

    Back with tax, I'm aware that some people make stuff to sell on Ebay as a hobby and don't mind losing money, so it could also be advantageous to be registered for tax in such cases.

    As well as advice from HMRC many accountants offer initial free consultations and Citizen's Advice Bureaus can be helpful too, especially regarding tax and earning on bemefits.
    .
  • Muffy0
    Muffy0 Posts: 4,387 Forumite
    So where do I stand as someone who sells a lot competition wins - all brand new items. Are tehy my personal items as I haven't actually purchased them - therefore I don't have to inform the tax people?
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