HMRC Taxes - Selling items from my personal collection, however sales are over the £1000 allowance

[funkojason]

Hey everyone,

I've got a question about selling stuff on eBay and taxes. So, I've been selling off some of my collectibles, mostly vinyl records and Funko Pop toys, for a few years now. This year so far, my sales are £3,000 from selling 51 items. In the past couple of years, I sold around 150 items each year, which equalled a total of £8,000 in sales annually.

Thing is, I've never had to deal with filing taxes for these sales because it was just me clearing out some of my collection. But now that eBay's sharing sales info with HMRC, I'm a bit worried. Especially since a lot of the stuff I'm selling, I've had for years, so proving I'm not making a profit might be tricky.

If I didn't need to file a tax return when my sales revenue were £8,000 in 2022 and 2023, then I don't see why I would need to file one this year since my sales are going to be around the same, especially now that everything is automatically reported to the HMRC regardless.

Anyone else in a similar boat or have advice on how to handle this? Appreciate any help!
Thanks!

[*vyolla*]

It all boils down to whether or not you're a private seller or trading as a business.

A private seller is one who is just selling off their own personal items such as clothes from their wardrobe, bits from their loft/garage etc. They wouldn't pay tax on their sales.

A Business seller is someone who buys or makes items to sell on.  They need to be registered as a business to meet the requirements of UK law. They need to declare income to HMRC once they reach £1,000 worth of sales (eBay will be providing HMRC with your details anyway so it's vital to keep correct accounts for your tax return). You can obviously offset more expenses as a business seller, but can't offset any at all as a private one.  

eBay will pass on data to HMRC automatically if you're selling 30 or more items a year OR have total earnings over the equivalent of £1,740. eBay will automatically share this information with HMRC by 31 January 2025 – the first lot of data-sharing will cover the 2023/24 tax year.

This eBay guidance page explains what's being reported and when:

https://www.ebay.co.uk/help/account/regulatory/uk-digital-sales-reporting?id=5454&st=3&pos=1&query=U...

Nobody knows what HMRC will be doing when they receive the data, at a guess if you're selling off your collection they'll send you a nudge letter and ask you to confirm that you are a private seller. 

[funkojason]

So based on my research, your response, the guidance page you provided and the gov.uk website for checking if I need to tell HMRC about additional income, the answer has been no, I do not need to pay taxes. The only other thing however, Is it only for businesses that sell over £1,000 that then need to file a tax return? Or would I need to complete one myself? If this information is sent to eBay automatically, doesn't that part take care of itself, for a private seller like me?

Thanks for your help!

[*vyolla*]

Again, a business seller is defined by what is being sold.

The £1,000 Trading Allowance is for small businesses, not private sellers who wouldn't be paying tax on their sales anyway.

HMRC will let you know what information (if any) they require from you. Looking at what you've sold I think that you may trigger their algorithm.

[rainbowtrax]

@funkojason  Looking at the records you currently have listed - this year's RSD was only three weeks ago. You'd probably have a hard time arguing the case that those records were from thinning your personal collection when you listed them just a week after RSD at a large markup on retail. If you've been doing that with previous RSDs then, depending on your turnover, you may find that you should have been declaring for previous years.

I know nothing about Funko Pop so can't advise on how your sales of those are likely to be viewed.

[ett1954]

@funkojason  HMRC have a criteria which they judge whether someone is a collector or a trader known as 'proof of ownership' whereby they evaluate whether someone is buying to collect or to sell on (trading).

Your Funko Pop all appears to have been produced within the last 7-8 years, and some in the last year or two.  As @rainbowtrax  has pointed out with your records I would doubt whether some, if not all, would pass the test of a collector selling off his old collection.

I doubt if anyone on these boards will know the exact way HMRC implement this test to make that determination.  I would advise you to seek the advice of an accountant who may be able to point you in the right direction with what you will require to proof to HMRC that you are in fact a genuine collector should they contact you.  In the meantime you should try and find any evidence that supports your declaration; start by digging out your original receipts, or at least credit card statements, bank statements etc.

[double_o_heaven]

If something has been bought to sell on with the intention of making a profit, it doesn't matter if the period in between buying and selling is weeks / months or several years.  A lot of people buy collectible items and hold them for a few years knowing the value will increase, before selling.

The argument for whether they (or you) are a collector or a dealer is one to be had with HMRC.

Just because eBay will pass your details onto HMRC does not mean they will automatically send you a tax return for completion, it is much more likely to be a letter in the first instance as Vy says.

Interestingly they have started to send out paper returns again (after a few years of either having to print it myself or call and ask for one) - I would imagine they are expecting a lot more to be filed and have decided to make it as easy as possible!

[jckl1957]

The information is not sent to Ebay, Ebay send it to HMRC.

They will have your name, address, bank account details and NI number, so they will know a lot about you in addition to your sales on Ebay, by volume and amount.

You need to consider whether or not HMRC will think you are trading.

I usually suggest people look at HMRC's 'badges of trade' (listed below).  These are one set of criteria they use to decide if an online seller is a trader/buying to sell.  The onus will be on you to prove you are selling off a private collection and not trading.  You may need to think about how you would do this.

HM Revenue & Customs (HMRC) now lists nine badges of trade:

• profit seeking motive.
• the number of transactions.
• the nature of the asset.
• existence of similar trading transactions or interests.
• changes to the asset.
• the way the sale was carried out.
• the source of finance.
• interval of time between purchase and sale.

[funkojason]

I'll actually be selling those records at a loss, I pre-ordered them for a huge mark up before RSD as I wanted to guarantee I'd get them, however an unexpected bill has come up, which has caused me to put them back up on eBay. In terms of the price, they are priced highly as I am waiting for reduced fees until I actually try and sell them. Apart from that, all the other collectibles I have up are those funko figures from my collection from years ago, which is hard to now get receipts for all of them. I have proof of purchase of the vinyl records, so I'm not worried about that at all, and yes, they at least were apart of my personal collection for a small while.

I haven't had to provide my national insurance number to eBay or provide any additional information since they annouced the change with the HMRC, I want to ask since you are a big seller, have you had to provide this information? As apparently once you hit a certain limit, eBay will then ask you for that information. Thanks for the help 🙂

[rainbowtrax]

No, no one's had to provide it yet. I think ebay updated their info to say that they'll request it in November or December from all sellers who meet the criteria. I think they're probably leaving it as late as possible to try and encourage people to keep selling for as long as possible. They have to provide details to HMRC in January. I predect chaos when they suddenly start demanding NI numbers from thousands of blissfully unaware sellers.

[daisysmart]

I have recently been contacted by HMRC and asked to carry out a compliance check for items sold on ebay in 2021/23.  I have 2 ebay accounts.  One is for a small number of items that I buy and sell for profit (I declare that to HMRC) and the other is for personal items.  

So here is what happened.  They wanted copies of all statements from banks, credit cards, savings and paypal accounts.  They went through all of my statements, line by line, wanting explanations of all money that has gone into my account.  I had to provide evidence and get signed statements from friends and family if they had paid any money into my account, explaining what is was for.   They will count any money going into your account  as a business unless you can justify or prove it is a personal sale.  If you sell a lot of the same product/items they will class it as a business sale.

The amount of work I had to put into it was obscene.  

Thankfully they could see that my personal sales had no costs and clearly were personal items.  Otherwise I would have been in trouble.  Not only do they charge you what they think you owe, they also add a fine and then interest on top of that.  

It took about 3 months  and the case was closed and I had nothing to pay.  I am so glad I declared the items that I have bought and sold for profit.

.

[69_craig]

This is an interesting debate. I've had a huge comic collection for years and have now started selling this year due to a lack of space. The thing is, I've been buying collected omnibuses for my bookshelf as handy substitutes for favourite issues that I've sold on, and I am still buying (but not selling) issues of The Walking Dead as that series is a particular favourite. 

Without knowledge of certain hobbies, it strikes me that the HMRC could make snap judgements on what they consider to be trading when it is in fact clearing loft space (anything I buy is likely to be around 1/50th of the amount of capacity of the existing collection). 

[*vyolla*]

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@daisysmart wrote:

I have recently been contacted by HMRC and asked to carry out a compliance check for items sold on ebay in 2021/23.  I have 2 ebay accounts.  One is for a small number of items that I buy and sell for profit (I declare that to HMRC) and the other is for personal items.  

So here is what happened.  They wanted copies of all statements from banks, credit cards, savings and paypal accounts.  They went through all of my statements, line by line, wanting explanations of all money that has gone into my account.  I had to provide evidence and get signed statements from friends and family if they had paid any money into my account, explaining what is was for.   They will count any money going into your account  as a business unless you can justify or prove it is a personal sale.  If you sell a lot of the same product/items they will class it as a business sale.

The amount of work I had to put into it was obscene.  

Thankfully they could see that my personal sales had no costs and clearly were personal items.  Otherwise I would have been in trouble.  Not only do they charge you what they think you owe, they also add a fine and then interest on top of that.  

It took about 3 months  and the case was closed and I had nothing to pay.  I am so glad I declared the items that I have bought and sold for profit.

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Wow, that's pretty terrifying, tbh. 

I'm confused about one thing though - this private account that you're posting here on looks to be a business account? 

[daro2096]

If you are a private seller and you are on unemployment benefits like Universal Credit I wouldn't worry about it as unemployment benefits are I think not counted as taxable income. If your total sales in any tax year is less than £12,570 there is no taxes to pay.

However if you sold something and made more than £3,000 profit on an item you would need to pay CGT on it.

Disclaimer: I am not a tax expert.

[*vyolla*]

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@daro2096 wrote:

If you are a private seller and you are on unemployment benefits like Universal Credit I wouldn't worry about it as unemployment benefits are I think not counted as taxable income. If your total sales in any tax year is less than £12,570 there is no taxes to pay.

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I've no idea if that's a means tested benefit, but if any part of it is then any extra money coming in may throw a spanner in the works there, I would strongly suggest that anyone in receipt of any kind of benefit checks with the DWP.

[daro2096]

I have checked. Univeral Credit is not taxable. Nor is PIP.

As far as I know the only taxable benefits is the State Pension and Carer's Allowance.

[*vyolla*]

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@daro2096 wrote:

I have checked. Univeral Credit is not taxable. Nor is PIP.

As far as I know the only taxable benefits is the State Pension and Carer's Allowance.

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It may not be taxable, but earning £10k on eBay may affect entitlement.

Seriously, after the debacle of the PIP allowance where a carer who earnt £1 more than they should've done and gets landed with a back dated bill for a couple of thousand, I would suggest not taking advice from anyone on any internet forum, but going straight to source to check. In this case DWP. 

[double_o_heaven]

Universal Credit is very much means tested. 

A sale of personal items will not need to be declared, but any amount of trading income will be.  And if it is substantial, it will reduce the amount of money paid out.

So best to seek the answer to "am I trading?" from HMRC first, so that it cannot be claimed back in the future.  Because if they go after someone for unpaid tax, they sure as hell will also look at overpaid benefits for that same time period.

You are correct in that neither UC or PIP is taxable.  Neither is PIP means tested.

[4_bathrooms]

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@double_o_heaven wrote:

Universal Credit is very much means tested. 

A sale of personal items will not need to be declared

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I'm not so sure about that. As I understand it, any change of circumstances - including receiving money from the sale of personal items - needs to be reported. Anyone who is unsure should check with Universal Credit or their Jobcentre if they use one.

[double_o_heaven]

Hmm, I would say only if it increases the money you have "saved" by at least £250.  As payments are reduced by about £4 for every amount of £250 you have saved over the £6k limit.

But they aren't stupid - they know current accounts will vary considerably, for example when they pay out a grand or so every month (to some) - they wouldn't expect you to declare that as a change (!) so they tend to just look at actual savings, or at least should do.

But again, I can only advise...  Anyone needing cast iron proof, should speak directly to the DWP.