eBay Private Seller - Self Assessment Tax Return??

Defensivea

Spoonie_Turtle said:

steviebabes said:

This is from MSE News -

Your information WON'T be automatically shared if you only sell a small amount of goods  

If all you're doing is selling goods online, firms will ONLY pass on data to HMRC automatically if you're selling 30 or more items a year AND have total earnings over the equivalent of €2,000 (currently around £1,700) – so if you're doing a lot less than that, it isn't an issue. However, it's worth noting you may still have to

Right, this is exactly where clarification is needed!  So many people read that and think it applies to profit on anything they sell.

Which is wrong:
1. It's £1,000 in a single tax year
2. From TRADING
3. It's £1,000 gross income, not profit (profit being what most people think by 'earning')

Thanks for this.

Tax is obviously applicable to the profit but having scanned some articles, there was some ambiguity as to whether the £1k relates to earnings or profit.

So as someone that has:
-sold just over £1k of camping equipment (includes eBay fees reduction etc) with the aim to make a one-off profit (saw a silly deal!)
-sold a handful of items that I found in my parents loft

It would be prudent to complete a self-assessment form as 'genuine' trading exceeds £1k, although my profits are only ~£400? This excludes loft items.

I cannot help but think that many folk would simply sell to just under £1k and plead ignorance.
Silly me for not giving this more thought!

What's even worse is that this would take me over a tax bracket!

Thanks again.

subjecttocontract

Whatever happened to innocent until proven guilty ?......HMRC need to provide evidence of guilt, until then you are innocent.

How will this work ? ......So, they send you a letter suggesting you are trading......you just send a letter back saying you are not and invite them to provide evidence to the contrary ?

Bertie129

Miser1964 said:

IMHO it would be prudent to sell using different accounts if you're going to exceed the £1,000 trading allowance; once classed as a 'trader' you'd be obliged to offer the returns etc. that are legal requirements on business sellers. It would also simplify the book-keeping and correspondence with HMRC.

Thank you, I'm going to start that separation from now. Hopefully it won't be an issue that it's all been on one account until now😩 Would HMRC accept that some items were 'traded' and some were personal? It could get complicated trying to prove which are which. I am probably at about £3000 total eBay income, with about half of it items that were bought to be resold and the rest from loft/garage clearance.

Though I guess the second hand child's bike I sold at a loss could offset the profits from the traded items? Either way it's a paperwork nightmare.

DullGreyGuy

Defensivea said:

Spoonie_Turtle said:

steviebabes said:

This is from MSE News -

Your information WON'T be automatically shared if you only sell a small amount of goods  

If all you're doing is selling goods online, firms will ONLY pass on data to HMRC automatically if you're selling 30 or more items a year AND have total earnings over the equivalent of €2,000 (currently around £1,700) – so if you're doing a lot less than that, it isn't an issue. However, it's worth noting you may still have to

Right, this is exactly where clarification is needed!  So many people read that and think it applies to profit on anything they sell.

Which is wrong:
1. It's £1,000 in a single tax year
2. From TRADING
3. It's £1,000 gross income, not profit (profit being what most people think by 'earning')

Thanks for this.

Tax is obviously applicable to the profit but having scanned some articles, there was some ambiguity as to whether the £1k relates to earnings or profit.

So as someone that has:
-sold just over £1k of camping equipment (includes eBay fees reduction etc) with the aim to make a one-off profit (saw a silly deal!)
-sold a handful of items that I found in my parents loft

It would be prudent to complete a self-assessment form as 'genuine' trading exceeds £1k, although my profits are only ~£400? This excludes loft items.

I cannot help but think that many folk would simply sell to just under £1k and plead ignorance.
Silly me for not giving this more thought!

What's even worse is that this would take me over a tax bracket!

Thanks again.

Where is the ambiguity?

eBay will provide HMRC with anyone with over £1,000 revenue... they have no idea how much the stock cost the potential vendor to be able to assess profit.

The current requirement is for anyone with more than £1,000 revenue to complete a tax return 

Taxes are calculated on profit. 

Selling your own stuff isn't trading and doesn't have profit and is irrelevant for income tax (but may be relevant for capital gains tax if they are high enough value etc)

Defensivea

DullGreyGuy said:

Defensivea said:

Spoonie_Turtle said:

steviebabes said:

This is from MSE News -

Your information WON'T be automatically shared if you only sell a small amount of goods  

If all you're doing is selling goods online, firms will ONLY pass on data to HMRC automatically if you're selling 30 or more items a year AND have total earnings over the equivalent of €2,000 (currently around £1,700) – so if you're doing a lot less than that, it isn't an issue. However, it's worth noting you may still have to

Right, this is exactly where clarification is needed!  So many people read that and think it applies to profit on anything they sell.

Which is wrong:
1. It's £1,000 in a single tax year
2. From TRADING
3. It's £1,000 gross income, not profit (profit being what most people think by 'earning')

Thanks for this.

Tax is obviously applicable to the profit but having scanned some articles, there was some ambiguity as to whether the £1k relates to earnings or profit.

So as someone that has:
-sold just over £1k of camping equipment (includes eBay fees reduction etc) with the aim to make a one-off profit (saw a silly deal!)
-sold a handful of items that I found in my parents loft

It would be prudent to complete a self-assessment form as 'genuine' trading exceeds £1k, although my profits are only ~£400? This excludes loft items.

I cannot help but think that many folk would simply sell to just under £1k and plead ignorance.
Silly me for not giving this more thought!

What's even worse is that this would take me over a tax bracket!

Thanks again.

Where is the ambiguity?

The current requirement is for anyone with more than £1,000 revenue to complete a tax return 

Taxes are calculated on profit. 

Thanks for your response.
I have edited your message in the quote to reply to this specific point.

Pre-the new rules on platforms having to share information with HMRC, there was only the £1k threshold.
Some articles suggested that a tax return would only be required if earnings exceeded £1k. Some articles referred to profits exceeding £1k...

I found the other person's response helpful 😊

Spoonie_Turtle

Defensivea said:

DullGreyGuy said:

Defensivea said:

Spoonie_Turtle said:

steviebabes said:

This is from MSE News -

Your information WON'T be automatically shared if you only sell a small amount of goods  

If all you're doing is selling goods online, firms will ONLY pass on data to HMRC automatically if you're selling 30 or more items a year AND have total earnings over the equivalent of €2,000 (currently around £1,700) – so if you're doing a lot less than that, it isn't an issue. However, it's worth noting you may still have to

Right, this is exactly where clarification is needed!  So many people read that and think it applies to profit on anything they sell.

Which is wrong:
1. It's £1,000 in a single tax year
2. From TRADING
3. It's £1,000 gross income, not profit (profit being what most people think by 'earning')

Thanks for this.

Tax is obviously applicable to the profit but having scanned some articles, there was some ambiguity as to whether the £1k relates to earnings or profit.

So as someone that has:
-sold just over £1k of camping equipment (includes eBay fees reduction etc) with the aim to make a one-off profit (saw a silly deal!)
-sold a handful of items that I found in my parents loft

It would be prudent to complete a self-assessment form as 'genuine' trading exceeds £1k, although my profits are only ~£400? This excludes loft items.

I cannot help but think that many folk would simply sell to just under £1k and plead ignorance.
Silly me for not giving this more thought!

What's even worse is that this would take me over a tax bracket!

Thanks again.

Where is the ambiguity?

The current requirement is for anyone with more than £1,000 revenue to complete a tax return 

Taxes are calculated on profit. 

Thanks for your response.
I have edited your message in the quote to reply to this specific point.

Pre-the new rules on platforms having to share information with HMRC, there was only the £1k threshold.
Some articles suggested that a tax return would only be required if earnings exceeded £1k. Some articles referred to profits exceeding £1k...

I found the other person's response helpful 😊

This is exactly why we need clear, accurate reporting.

The previous poster is correct, if you have gross trading income over £1,000 in a single tax year you have to register for self-assessment.  But any tax payable will be calculated on the actual profit.

The £1,000 threshold is called the 'trading allowance' if you want to read more about it.

vacheron

I can see how this can seem like a minefield for for many who have never needed to consider non-PAYE taxation.

These are the rules as I interpret them, and as many have said on this thread, these taxes are not new, it was simply up to the individual to realise when their income was taxable and report as necessary, however as this may now be done for you by your trading platforrm of choice, there is less opportunity to "forget" to inform HMRC as people may have done previously:

1. If you buy or make items with the purpose of re-selling for profit and the income (i.e. ALL the money you recieve for these endeavours) does not exceed £1000 in each tax year (before any deductions for things like eBay fees and postage etc) then you do not need to report this to HMRC.
   
   
2. If you buy or make items with the purposes of re-selling for profit and the income (i.e. ALL the money you recieve for these endeavours) does exceed £1000, then you do need to report this to HMRC, however you can still receive the initial £1000 trading allowance but the remainder will be taxed based on any profits (not your total income), so you can apply the usual deductions etc. as you would for any other potentially taxable income.
   
   
3. If you are selling your own personal posessions, i.e. things which you purchased for your own use, or were gifted (and which are generally sold at less than their initial purchase price) then these items are not considered part of the £1000 trading allowance and you do not need to report this to HMRC.
   
   
4. If you are selling your own personal posessions i.e. things which you purchased for your own use, or were gifted, and these have increased in value since you aquired them, these sales may attract capital gains tax depending on what the item is. However you are allowed to incur £6000 of capital gains tax free each year but this will fall to £3000 in 2024-25. 

In my personal situation, my eBay income last year came from 4 streams, I have listed them below, and how I approached them:

• Old items I don't need any more. (our own clothes and books etc.that are too good for the charity bag, my sons old toys etc.) these do not need to be reported.

• A lot of old electrical equipment and components which I was gifted when my old factory closed down about 4 years ago. Any items which I have come to realise I will never use have been listed for sale. These are being sold well below market value to clear space in my garage, were not obtained with the intention to sell, and when they are gone, they are gone. Again, not trading so no need to be reported.

• Items which I have purchased at a bargain price with the intention to re-sell. This year this has included some PC components (corsair RGB case fans) where I have needed two  but found it cheaper to buy a pack of 6 and then list the others for sale to make my money back. I also purchased 3 reasonably inexpensive watches (around £150 each) one of which I kept, and the othey two I sold for £275 each. This I would consider as "trading" to be safe, but as these items all together do not exceed £1000 I do not need to declare this

• I sold a couple of watches from my own personal collection for more than I initially paid about 10-15 years ago and the total gain was approximately £4000. As this is less than my £6000 annual capital gains allowance that normally not have been a consideration, however, this year I also sold some shares which used allowance meaning I may have had to pay capital gains tax on this £4000. However, as "machinery" is excempt from CGT, and HMRC define a mechanical watches as "machinery", these are considered a "wasting asset" and as such there is no CGT to pay.

horsewithnoname

subjecttocontract said:

Whatever happened to innocent until proven guilty ?......HMRC need to provide evidence of guilt, until then you are innocent.

How will this work ? ......So, they send you a letter suggesting you are trading......you just send a letter back saying you are not and invite them to provide evidence to the contrary ?

Of course you are still innocent until proven guilty. All that would happen would be that you would get a letter enquiring about the money you got from selling. If you were just having a clear out, no problem. 

Anyway HMRC don’t have the staff to go after everyone, so there is likely to be quite a bit of “risking” done before any letters are sent. 

se2020

Not quite innocent until guilty..
I expect quite a few people will get letters (ad this can be done easily enough by an automated process)
I have read several posts from people who have had letters already. 

I am aware hmrc do not possibly have the resources to investigate every seller that the computer flags up but, I presume, they must have/will delegate enough resources into investigating at least some of these sellers otherwise why burden themselves asking for the information from ebay etc anyway?
I would guess the report receiving systems/software have cost several thousand (at best!) and I would believe they would need to have shown they would be of benefit (ie enforcement was possible) before spending the money on them.

So, my guess is, a few people WILL get looked at. 
Just Google "hmrc burden of proof"
As the law regarding hmrc currently stands, hmrc will look thorough the figures and claim you owe £xxx in tax.
You then have to provide proof that the figures they suggest are incorrect (or pay the bill)

Obviously before it gets to that stage they will give you chance to explain (convince them) that the stuff you are selling does not attract tax etc.

But, as per the example a few posts previously,  those that have "seen a bargain" and thought "I can make a quick profit" on it could well end up with a tax bill with no legitimate reason to reduce it.
Ie, they are already "guilty" but probably completely unaware that tax was due anyway.

I'd guess the warning letters will shock a few people like that into either "trading" properly (and paying any tax if due) or sticking below the £1k a year.

Those that currently know what they are doing and just sell for profit avoiding any due taxes will probably just keep playing the system and hopefully the hmrc computer/software will be smart enough to target these and eliminate the others. 

Mjb2223

Cosmic_Squidly said:

Also what year does it cover exactly? The new rules came into effect on Jan 1st this year, but they won't have to report until the end of Jan 2025. So they would be reporting the 2024 calendar year and on, right? So it won't be back-dated is my understanding?

My friend who is 68  who has been selling some bits on ebay asked me this today and i didnt know.. id be interested to know this too