HMRC tax on £1000 sales

[Anonymous]

Does the £1000 p.a. sales figure include postage? I sell low value items & the postage is usually higher than the value of the item.  On £1000 sales i'd be lucky to make £200 profit.  Seems the end of Ebay for sellers like me.

[deal4321]

How will HMRC or ebay know how much profit did I made. for example: I buy a watch for £2000 and I sell it for £2050, will I have to pay tax for £2050 even if I made a profit of £50?

[ett1954]

I would suggest you speak to an accountant pdq.

[papso22]

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@deal4321 wrote:

How will HMRC or ebay know how much profit did I made. for example: I buy a watch for £2000 and I sell it for £2050, will I have to pay tax for £2050 even if I made a profit of £50?

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I suggest you also upgrade your account to a business account,  at the moment you are breaking consumer law as well as (probably), not meeting your tax obligations. 

[*vyolla*]

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@deal4321 wrote:

How will HMRC or ebay know how much profit did I made. for example: I buy a watch for £2000 and I sell it for £2050, will I have to pay tax for £2050 even if I made a profit of £50?

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You've overlooked correctly registering as a busines seller, so may have shot yourself in the foot a bit here.

It depends how much you have left of your tax free allowance, certainly you'll need to complete a self assessment form.

A Business seller is someone who buys or makes and item 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.  

To correctly register as a business seller simply go to your Personal Information in your account and to the right of Account Type, which will be showing as 'Individual'  you'll see an Edit option.

https://accountsettings.ebay.co.uk/profile

This doesn't affect your feedback profile or any current listings, it merely upgrades your account so that you're legally compliant. 

[biff0]

Thanks all to all who have provided the useful information.

I've got a couple of questions..

1) related to what is a sale of a personal sale rather than trading

a) unwanted gifts?

b) items inherited/bequested and not wanted?

2) Regarding the timescales/data to be provided to HMRC.  I understand that this will begin for the calendar year 2024. Therefore HMRC will only have information on the last 3 months of 2023/24 and as long as this is <£1000 there is no need to consider declaring any trading earnings in 2023/24 tax return.

[papso22]

Unwanted gifts and inheritances are personal possessions. 

If you have trading income of over £1,000 in the tax year 23/24 you need to declare it, it doesn't matter that only 3 months data will be provided to HMRC by ebay.

[biff0]

Thanks for the feedback, I'm selling my/my kids/inherited unwanted items but have started to keep records since this got more  publicity in January.

[caledonian55]

The postage should be included in the sales total AND as an expense, similar to other possible expenses such as packaging, mileage to post office etc.  All receipts for these should be retained.

[b_quik2click]

i belive HMRC want to know SALES BEFORE COSTS - so before fees, postage, listing fees, etc etc.. IS THIS CORRECT?

I'm sure this is the case, but can someone clarify?

ALso can someone clarify how we evidence our costs to HMRC on self assessment as sole trader? or is it a case of HMRC will contact us after they get sales report from ebay of our ebay account?

I have purchase history of items I pay for on ebay / amazon etc.. but sometimes I buy discounted items through gift cards or creditted funds from prior returned goods or discount offers from amazon or ebay... in this case how do we capture the cost of goods - do we state the selling price or final sold price, even though techincally any discounts usually came from our original spend (refunded).. 

Hope that makes sense.. and can get a good answer?

Thanks  

[*vyolla*]

First off, you're not registered as a business seller, and it does look like you should be (if you have your own personal items to list you could set up another selling account to use as a private seller).

A Business seller is someone who buys or makes and item 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.  

To correctly register as a business seller simply go to your Personal Information in your account and to the right of Account Type, which will be showing as 'Individual'  you'll see an Edit option.

https://accountsettings.ebay.co.uk/profile

This doesn't affect your feedback profile or any current listings, it merely upgrades your account so that you're legally compliant. 

Just a heads up too before eBay notice and sanction you for it - you cannot put your contact phone number in listings, even if you try to hide it by adding spaces. 

[rainbowtrax]

HMRC will tax you on your profits but you enter both your turnover and your expenses on your self-assessment. The trading allowance of £1,000 is turnover, not profit. It only applies if you are trading - which you clearly are on your new multiple quantity listings. Mixing business and private items on the same account does make things more complex for you when it's time to submit your self-assessment. But nothing has changed from previous years in terms of what you need to declare.

HMRC won't concern themeslves with the intricacies of what and how you paid for your stock, they just expect you to keep accurate records in case they want to see proof. Working that out and being able to prove it is down to you as far as they're concerned,

[b_quik2click]

thanks - I'll get in touch with ebay regarding my account compliance - but after speaking at length with ebay customer support previously on phone, they did say i'm fine to sell as I am , but my responsibility to report to HMRC is my own - so I need to register for self assessment after April 2024 to report my Sales. 

My account shows selling both used items and new items - I'm not registered as a company nor sole trader because I was never exceeding my tax limits until this year and not operating as a business 

I'm not working right now since 12 months, therefore any sales revenue from Ebay not be taxed (speaking to HMRC about this) - as mytotal income for the year is below the 12K threshold - even after ebay sales top my earnings for the year. I still have to report HMRC as I've exceeed the 1,000 limit, but as I know there is no tax to be paid below my income allowance of 12K p/year - AND I do even qualify for paying voluntary National Insurance then I will simplify the self assessment by claiming my 1000 trading allowance without reporting expenses - as this makes 0 difference to my taxable circumstances. This would be different if I had earned above 12K with other income or paid employment.

[*vyolla*]

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@b_quik2click wrote:

thanks - I'll get in touch with ebay regarding my account compliance - but after speaking at length with ebay customer support previously on phone, they did say i'm fine to sell as I am

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eBay CS are largely based in the UK Phillipines and not familiar with anything do do with UK tax or consumer regs, there is no point asking them about this.

You need to upgrade to a business account for your business items in order to be compliant.

See eBay's guidance page here, where they state

An eBay seller must register as a business if, for example, they sell items they have bought to resell, they make items in order to sell them, or if they buy items for their business.

What is the policy?

Business sellers can't represent themselves as private individuals

Taken from:

https://www.ebay.co.uk/help/policies/selling-policies/selling-practices-policy/business-seller-polic... 

[papso22]

You are not fine to continue breaking consumer law,  whatever eBay CS says.

[b_quik2click]

to clarify - (also check with .gov website or contact HMRC)..

but tax liability kicks in for profits after expenses over the 1K threshold - but also the amount is added to personal tax allowance over and above your 12570 annual earnings limit...

so if you make 5K ebay sales and your annual salary and other income is 15K TOTAL - then the tax is payable on the profits from the 5K (so after expenses) + the usual taxable amount above 12570 ..

Personal Income tax allowance = 12570 p/a

so your side hustle and ebay sales will contribute towrds this therefor tax liability is for above this allowance 

Hope this is helpful and if I'm completely wrong please let me know

thanks 

[b_quik2click]

no, the tax in your profits -you need to include your cost of goods and cost of sales on the self assessment form. ebay report will show your gross sales before and after ebay selling costs , and potentially postage too..

you just need to have record of your purchase and obviously any other costs outside ebay reports - also the tax on the £50 will be part of your annual income tax allowance of 12570 so whatever you earn of this limit + your £50 (if there no other expenses to include, or other income)..

[nadabdulla]

Sorry if I resume this post.
Do you know if cancelled and refunded orders count as sales for the £1700 ebay- mark?

I have at least 2 cancelled auctions for Rule of Rose (£700 in total) which of course I didn't earn, because it's the same Rule of Rose that has been sold twice and refunded twice. The first buyer bought it 'by mistake' and the second returned it because 'he found a better price'. I shouldn't even have accepted that return, but otherwise it would have been a negative feedback for sure. 
Anyhow, now in my sold list there is £700 that I have never earned and greatly contributes to the £1700 ebay limit.
Not sure If I was clear in my writing..

[*vyolla*]

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@nadabdulla wrote:

Sorry if I resume this post.
Do you know if cancelled and refunded orders count as sales for the £1700 ebay- mark?

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They do not.

Your total sales for the year are calculated based on the full amount received for your sales transactions excluding:

• Shipping amounts paid to eBay
• VAT collected and remitted by eBay
• VAT charged on fees
• Amounts deducted by eBay for fees, coupons, cancelled or deleted orders

Taken from this eBay guidance page:

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

[nadabdulla]

great, thanks