Tax on eBay earnings?

Shoog

I've recently begun to sell regularly on eBay and I'm wondering if I need to register for self-assessment. I have a full-time job and pay income tax at the standard rate.

It's mostly consumer electronics stuff (I'll just refer to them as units).

I started out with looking to buy a unit for myself. I ended up buying several faulty units and repairing one. I then repaired some of the others and sold them on.

A few weeks later, I decided to upgrade to a newer model and went through the same cycle of buying faulty ones and fixing them up, keeping the best one and selling on the rest.

In doing this I also keep an eye out for badly listed items which can be tested and re-sold for a profit.

I also purchased a job lot of faulty units with the intention to repair and sell on.

I think somewhere in all that I crossed the line and may now be liable to pay tax on earnings.

It's a hobby really and the sums involved are small - £25 to 50 per week profit.

Does it sound like I need to declare it?

Could it be done in my wife's name, as she's not working right now, looking after the kids?

Advice appreciated.

Thanks

fengirl_2

£50pw profit is £2600 a year and so you should certainly register as self employed - you need to do this wihtin 3 months of starting. Keep a separate bank account for your Ebay earnings as well as full records of all your income and expenditure. You will then put together some accounts after a year's trading and enter the details on your self assessment. tax will be payable in Jan and July 2010. If you are doing the work, I don't see how this could be your wife's income.

Shoog

Thanks.

fengirl wrote: »

If you are doing the work, I don't see how this could be your wife's income.

I could get my wife to do a lot of the work and I could just help out (for free).

PasturesNew

As a couple, if your wife isn't earning, then it makes perfect sense for this to officially be her business. She'd then be able to make £6000 in earnings before tax kicked in.

So:
Broken items £10,000
Postage to receive broken items £1000
Postage to send them out, cost of wrapping paper and sellotape £2,500
Sell fixed items for £20,000
Self employed NI stamp cost £100

Costs: £13,600
Turnover: £20,000
Profit: £6,400

She'd pay tax on the £400 at 20%

Pennywise

Shoog wrote: »

Thanks.I could get my wife to do a lot of the work and I could just help out (for free).

This sounds like a techinical type of thing. Does she possess the skills, knowledge and experience to be able to do it herself. Could she do it without your input? If not, then the taxman will see it is a blatent attempt to transfer your taxable profits to her. The taxman isn't stupid!

Shoog

Thanks PasturesNew.

Pennywise wrote: »

This sounds like a techinical type of thing. Does she possess the skills, knowledge and experience to be able to do it herself. Could she do it without your input? If not, then the taxman will see it is a blatent attempt to transfer your taxable profits to her. The taxman isn't stupid!

Hmmm. Here's a list of activities:
1. buying faulty items
2. buying badly listed items
3. buying items listed as lots
4. cleaning up & testing items
5. repairing items
6. taking photographs
7. writing text for listings
8. establishing postage costs
9. designing and uploading listings
10. answering customer enquiries
11. processing payments
12. acquiring packing supplies
13. packing item for postage
14. making postage arrangements
15. paying eBay fees

Currently item 5 is the only one she couldn't do (and it's not as complicated or time-consuming as you might think). She would initially require advice for a few of the others.

I hope we can work something out because if tax has to be paid, then it probably won't be worth the effort.

Airwolf1

Can you give me a tip as to what you're doing? I could do with the extra cash!!

chriiiiiiiis

Shoog wrote: »

I hope we can work something out because if tax has to be paid, then it probably won't be worth the effort.

Why won't it be worth the effort? You're not making a loss.

Shoog

chriiiiiiiis wrote: »

Why won't it be worth the effort? You're not making a loss.

It's just down to the time involved.

Let's say it's £35-a-week, less 20% tax equals £28.

It probably adds up to 5 hours a week, so that's just over £5 an hour.

I'm fairly close to the higher tax band so if it was added to my income the rate would be even worse.

RobertoMoir

Shoog wrote: »

I think somewhere in all that I crossed the line and may now be liable to pay tax on earnings.

I didn't think there was a 'line' to be crossed. You either earn an amount over your income tax allowance and it's all liable for tax, regardless of where and how it came from or you didn't earn over the taxable limit and didn't pay tax.

Doing it as a hobby 'on the side' or being a kid or being retired or anything like that doesn't enter into it.

PasturesNew

I still think your wife could be legitimately running this as her own business. The fact you give her a free hand with some aspects would be legit.

On the other hand, if it did turn out it was your tax liability (which I don't think would happen), how about chucking all the profit into your pension?

My money's 100% on the wife running it legitimately as wholly her own business though, with a free hand from you. Like any married couple would do for each other.

Or, you, legitimately as the buyer/fixer could sell them to your wife for costs + £5/fix (or appropriate value), then all the profit's pretty much made when her business (who bought them from your business) sells them. Your tax liability would therefore be minimal. But it would mean two tax returns. You'd get let off the NI contributions if you kept the earnings low, she'd pay the self-employed stamp.

But I'd just say it was all her business.