eBay seller - uk tax ???

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P3
P3 Posts: 169 Forumite
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I have been buying stuff mainly video game and mobile phone online at supermarket or Amazon when there is a bargain.

My intention was to get my money back with these gift card I have purchased from my amex credit card.

However I have now sold more than I expect and worry since I have been selling the same item over and over again, I will look like a trader. 

I have been reading online with these £1000 trade allowance

My question is 1) is the £1000 trade allowance just profit or sales ???

For example if I have sold 10 phone at £110, and it cost me £80 to purchase.

Have I gone over the allowance (£1100 sales) or under the allowance (£300 profit)

If it is the former, how is the tax calculated? 

Thanks

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  • soolin
    soolin Posts: 72,339 Ambassador
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    P3 said:
    I have been buying stuff mainly video game and mobile phone online at supermarket or Amazon when there is a bargain.

    My intention was to get my money back with these gift card I have purchased from my amex credit card.

    However I have now sold more than I expect and worry since I have been selling the same item over and over again, I will look like a trader. 

    I have been reading online with these £1000 trade allowance

    My question is 1) is the £1000 trade allowance just profit or sales ???

    For example if I have sold 10 phone at £110, and it cost me £80 to purchase.

    Have I gone over the allowance (£1100 sales) or under the allowance (£300 profit)

    If it is the former, how is the tax calculated? 

    Thanks
    The £1000 is turn over so includes all income including postage, it’s not profit. However that’s just for reporting to HMRC, after the £1000 you just need to declare yourself as self employed and then your taxable profit will be your entire turnover/income less all expenses including original cost, postage, eBay fees etc. 
    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.
  • P3
    P3 Posts: 169 Forumite
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    Thanks

    Using this example if I have sold 10 phone at £110, and it cost me £80 to purchase the phone?

    This mean it is better for me to use trading allowance and only pay (1100-1000) £100 @ 20% tax which is £20 Vs £1100 minus £800 @ 20% =£60

    (I know I can add other expenses such as eBay fee, postage etc)


  • FluffityBunny
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    P3 said:
    Thanks

    Using this example if I have sold 10 phone at £110, and it cost me £80 to purchase the phone?

    This mean it is better for me to use trading allowance and only pay (1100-1000) £100 @ 20% tax which is £20 Vs £1100 minus £800 @ 20% =£60

    (I know I can add other expenses such as eBay fee, postage etc)


    You've exceeded the £1000 trading allowance so you have to declare to HMRC as being self employed.
  • P3
    P3 Posts: 169 Forumite
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    I am aware I need to declare to HMRC as being self employed.

    But base on my example, how much tax am I looking at, and which method is best to pay the least tax
  • RFW
    RFW Posts: 10,030 Forumite
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    P3 said:
    I am aware I need to declare to HMRC as being self employed.

    But base on my example, how much tax am I looking at, and which method is best to pay the least tax

    Ask an accountant or HMRC. An accountant may find other things related to any other income that could be helpful.
    .
  • soolin
    soolin Posts: 72,339 Ambassador
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    P3 said:
    I am aware I need to declare to HMRC as being self employed.

    But base on my example, how much tax am I looking at, and which method is best to pay the least tax
    As per my previous answer, your taxable income is not linked to the £1000 allowance as such. You prepare 'simple' accounts , 'all income' which is everything including any postage you receive when you sell. Then a separate column for 'all' expenses and that includes the item cost, actual postage paid, ebay fees etc. The difference is your taxable profit which is subject to both tax and NI - how much tax and NI (if appropriate) is paid depends entirely on your other circumstances, PAYE, rental income , other self employment etc. 
    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.
  • DullGreyGuy
    DullGreyGuy Posts: 11,022 Forumite
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    P3 said:
    However I have now sold more than I expect and worry since I have been selling the same item over and over again, I will look like a trader. 

    I have been reading online with these £1000 trade allowance

    My question is 1) is the £1000 trade allowance just profit or sales ???

    For example if I have sold 10 phone at £110, and it cost me £80 to purchase.

    Have I gone over the allowance (£1100 sales) or under the allowance (£300 profit)

    If it is the former, how is the tax calculated? 
    If you are buying with the intention of selling then you are a trader and self employed.

    HMRC allows you to generate up to £1,000 of revenue (not profit) before they insist you have to register for self assessment as a self employed. In your example therefore you are over as you've had £1,100 of revenue.

    When it comes to tax you are taxed on your profit not your revenue but there are different ways of calculating your profit (or loss) which impact any potential cross impact of tax liability across your self-employed and employee life. Cash accounting is easiest but losses cannot be offset against your PAYE liability, accrual is more complex and allows offsetting if you make a loss however in a stock based business like yours you are much less likely to make a loss under accruals than cash accounting. 

    P3 said:
    But base on my example, how much tax am I looking at, and which method is best to pay the least tax

    You are taxed on your total incoming across all streams and so if you are already an additional (45%) tax payer on PAYE the amount would be different than if you are under the personal allowance for PAYE. 

    The best way to pay least tax is to make less profit, in one scenario that means you and HMRC are worse off. The other is naturally to ensure all allowable expenses are being claimed but it can tempt people to move from tax avoidance into tax evasion. 

    If you want more personalised advise then thats what accountants are for. 

  • tightauldgit
    tightauldgit Posts: 2,628 Forumite
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    P3 said:
    I am aware I need to declare to HMRC as being self employed.

    But base on my example, how much tax am I looking at, and which method is best to pay the least tax
    How much tax you pay will depend on what you are earning and your current tax rate but the tax will be calculated as tax rate * profit where your profit is sales minus all expenses. 

    So for selling 10 phones at £110

    Income = 10*110 = £1100

    Expenses = Cost of the phones (10*80) + Cost of the auctions/Ebay Fees + Cost of posting the items

    And your profit is Income - Expenses. 

    You will probably find you can add a few extra expenses in on your SA return such as using your home for business or maybe travel costs to get to and from the post office. 

    Then HMRC will tax you based on the tax rate * profit. 

    If this is your only income then you won't pay any tax because you will be under the threshold for income tax. If you work too then you need to be careful to see if this has pushed you over a threshold into a higher tax band. 
  • DullGreyGuy
    DullGreyGuy Posts: 11,022 Forumite
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    P3 said:
    I am aware I need to declare to HMRC as being self employed.

    But base on my example, how much tax am I looking at, and which method is best to pay the least tax
    How much tax you pay will depend on what you are earning and your current tax rate but the tax will be calculated as tax rate * profit where your profit is sales minus all expenses. 

    So for selling 10 phones at £110

    Income = 10*110 = £1100

    Expenses = Cost of the phones (10*80) + Cost of the auctions/Ebay Fees + Cost of posting the items

    And your profit is Income - Expenses. 

    You will probably find you can add a few extra expenses in on your SA return such as using your home for business or maybe travel costs to get to and from the post office. 

    Then HMRC will tax you based on the tax rate * profit. 

    If this is your only income then you won't pay any tax because you will be under the threshold for income tax. If you work too then you need to be careful to see if this has pushed you over a threshold into a higher tax band. 
    This assumes the OP buys 10 phones and sells all 10 phones before the end of the tax year.

    If they buy 10 phones and have only sold 5 by the end of the tax year if they've made a profit or loss will depend on which accounting route they take. 
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