Sales limit of £1000 for HMRC on eBay ?

mamabuddah

i May have read this wrong, but I believe that HMRC now want tax paid on ALL eBay sales once you pass a £1000 threshold, that’s turnover NOT profit. Apparently this was introduced because during covid there was an increase in people selling from home (sourcing items to sell) and a proper little cottage industry was created.
A lot of these sellers sold as “personal” accounts, not business, so HMRC are now using a sledgehammer to crack a nut by taxing everyone.

How can this be reasonable?  and they are getting away with this,  if people are selling personal items e.g. in a garage or house clearance of goods they had originally purchased with their own money they’ve already been taxed on? I can understand being taxed on profits on items bought specifically to sell...but to tax people on sales of items they’d already purchased and in 99% of cases they are losing money on?

Am I just getting this wrong? Have I become confused? How can you be taxed on sales of an item you originally bought and paid for and are now selling at LESS than you paid for it?

Spoonie_Turtle

mamabuddah said:

i May have read this wrong, but I believe that HMRC now want tax paid on ALL eBay sales once you pass a £1000 threshold, that’s turnover NOT profit. Apparently this was introduced because during covid there was an increase in people selling from home (sourcing items to sell) and a proper little cottage industry was created.
A lot of these sellers sold as “personal” accounts, not business, so HMRC are now using a sledgehammer to crack a nut by taxing everyone.

How can this be reasonable?  and they are getting away with this,  if people are selling personal items e.g. in a garage or house clearance of goods they had originally purchased with their own money they’ve already been taxed on? I can understand being taxed on profits on items bought specifically to sell...but to tax people on sales of items they’d already purchased and in 99% of cases they are losing money on?

Am I just getting this wrong? Have I become confused? How can you be taxed on sales of an item you originally bought and paid for and are now selling at LESS than you paid for it?

Where did you hear that?  The trading allowance is for people who are trading - buying to sell and make a profit.  So yes if people have been doing that over covid then they would have to do a self-assessment if they go over £1000 gross income, but they'd only be taxed on any income above the personal allowance threshold.  It's been that way for years, since 2017/18 according to LITRG https://www.litrg.org.uk/tax-guides/self-employment/what-trading-allowance

Selling your own unwanted stuff doesn't count (unless you also registered as a business on eBay, in which case you'd be hard pressed to argue you're selling your own personal possessions and not trading).  

Also https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#trade but the above link is way more in-depth.

soolin

There have been no Announcements from HMRC that I can see, where is the source of this please so we can check for ourselves as this would be a huge story for MSE as it would of course apply to private sales everywhere, not just ebay.

Without evidence I suspect this is another of those made up stories that get picked up by conspiracists and spread by friends on Facebook . 

 Spoonie_Turtle covers it well, but I think a lot of people don’t understand the £1000 trading allowance for businesses which has been in force for some years. There are still people as well that think the trading allowance means they can have a profit of £1000 from a business without declaring (they are wrong) or that there are ‘hobby sellers’ or even that if you have a full time PAYE job then any secondary income earned from trading is not taxable. 

mamabuddah

Not being a tax expert...here’s  an article that might explain better than me...my take is you’ll have to prove you’re NOT a trader...(I’ll look for more info as well)

https://taxscouts.com/self-employed-tax-returns/what-tax-do-you-pay-if-you-sell-on-ebay/

mamabuddah

Again, I read this advice as , if you sell more than £1k , HMRC will want to see if you are just getting rid of old tat and clutter or you are a trader...so it appears this arbitrary figure they’ve chosen as a gross figure sets the bar quite low (a couple of iPads and a laptop or two...easily tops that) so how do you prove you’re NOT trading?

https://www.moneydonut.co.uk/tax/tax-self-assessment/ebay-and-tax

soolin

There is nothing new in those articles at all, the question of tax is clear. If you sell your own personal items which were bought for use and no longer needed then you do not pay tax. However if you buy things or make things with an intention to sell , or even if you buy things use them once but bought with the intention to turn a profit then you are a business.

The article is slightly confusing as it talks about new items or second hand tat, selling new items is not a pre requisite of a business, in fact my small business sells mainly second hand tat- but the fact it is that I am still a business. 

I suspect what you heard is an intention by HMRC to start enforcing the rules, ie to catch out all those people running small businesses on ebay or at car boots but not declaring. I saw it all the time when I did a voluntary advice service, people making money buying say bundles of baby clothes and tidying them up and reselling at a profit, or even trawling charity shops to buy things ready for a car boot on a Sunday. On ebay it is easier to spot, I can find you a dozen accounts in a few minutes selling as a private seller (denying buyers their consumer rights) in the collectable or vintage categories.obviously whilst those sellers might be cheating ebay and the buyers they could still be declaring to HMRC .

During lockdown many people had time on their hands, my Facebook feed was full of people discussing places like Ali Express and their intention to buy a few things to resell for a bit of cash in hand. Constant requests for details of online wholesalers , dozens of small home craft and bakery businesses . 

HMRC have always chosen a handful of people a year (month whatever) to question and tend to start with easy targets . Selling second hand clothes on ebay in any quantity , especially with a variety of sizes and styles, was always a popular seller to write to to ask if they wanted to ‘reconsider’ their tax situation . I’ve seen HNRC raise a speculative tax bill on people who they suspect are trading, at that point then yes a trader would need to,prove why HMRC are wrong in their belief they are trading or in the amount they believe is due.

mamabuddah

@soolin and @Spoonie_Turtle thank you so much for your replies...speaking from my own experience, I can see what you’re saying...I am a personal seller and have been on eBay for over 20 years, selling bits and pieces...sometime 6 months or more between a sale but it’s only in the last 60 day period (clearing the roof space and the garage because we are moving house in the new year, of 35 years of clutter)...mostly our children’s stuff, that I have sold about 100 items, approx £3k, and more to go, I hope if they (HMRC) look at my sales, they would see that it’s all over 20 years old and very little of it sells for more than was originally paid for it in the 80’s and 90’s.
I can always get a signed statement from my children (36 and 33) that these are toys they played with...lol

JohnBrook

Hi,
My wife is severely disabled and spends the majority of her time reading, as we are in receipt of pension credit we resell these books on eBay to help fund further purchases. These sales exceed £1,000 per annum but there is no element of profit. Should we worry about the new reporting rules? Thanks.

JAG

JohnBrook said:

Hi,
My wife is severely disabled and spends the majority of her time reading, as we are in receipt of pension credit we resell these books on eBay to help fund further purchases. These sales exceed £1,000 per annum but there is no element of profit. Should we worry about the new reporting rules? Thanks.

Nothing to worry about. You are not trading for profit.

eBay will  automatically send a record of your sales activity to HMRC in January 2025 if you sell 30+ items or either approximately £1700 in sales revenue for the year 2024.

You won't have any tax to pay.

Unless you are generating substantial amounts of revenue then HMRC would not even be interested in looking into the report. It will mostly likely be all automated and only at a certain cut off point for sales revenue would it get flagged for further investigation.

RFW

mamabuddah said:

Again, I read this advice as , if you sell more than £1k , HMRC will want to see if you are just getting rid of old tat and clutter or you are a trader...so it appears this arbitrary figure they’ve chosen as a gross figure sets the bar quite low (a couple of iPads and a laptop or two...easily tops that) so how do you prove you’re NOT trading?

https://www.moneydonut.co.uk/tax/tax-self-assessment/ebay-and-tax

From Moneydonut:
"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."

That's quite poorly written. Only people who have bought or made to resell have to declare for tax purposes after revenue of £1000.

As others have pointed out the £1000 figure is only a trading figure. The more recent reporting figure is for more than 30 items and/or revenue of over 2000Euros.

RFW

mamabuddah said:

Not being a tax expert...here’s  an article that might explain better than me...my take is you’ll have to prove you’re NOT a trader...(I’ll look for more info as well)

https://taxscouts.com/self-employed-tax-returns/what-tax-do-you-pay-if-you-sell-on-ebay/

With respect to you and the website, that's a fee paying tax advice website. They offer a £119 consultation fee. There's much better advice, for free, on here. HMRC haven't changed anything, from what you say elsewhere they won't be interested in you.