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.

[papso22]

Yes, it includes postage charged as that is part of turnover for tax purposes.

Do you buy your items in order to sell them?

[Anonymous]

A Combination of personal items and some that are bought to sell on. Because my profits are relatively small, I assumed they would automatically be classed as being within my CGT allowance. I don't think it is worth my while having to submit tax returns what with all the paperwork required. Looks like the car boot sale route for me!

[papso22]

The business sales would potentially be subject to income tax,and need to be sold on an eBay business account.  Only your personal items can be sold on a private account.

It's not Capital Gains Tax, that is a different tax which applies to the sale of individual items, not the turnover from several items.

[Anonymous]

Got it! Cheers. But, if I buy an item say, from a charity shop, is it not a personal item once I have paid for it, even if I decide to sell it a week later? Seems murky waters to me.

[jow1995 · Accepted solution]

you are buying to earn a profit so its a business, how much you make still has to be declared to HMRC.

eBAY will legallyhave to supply HMRC if you sell more than £1700, postage counts towards that total.

 if you have not been declareing sales in the past, HMRC CAN LOOK AT YOUR sales for the past 7 years.!!  

[double_o_heaven]

They can go back 20 years if they suspect deliberate tax evasion...  😉

[btr.style]

Buying from a charity shop to sell on for profit a week later is thrifting. You didn't buy it for yourself, use it, get bored of it and decide to sell it on to get rid of it. If you got bored of it within a week, you'd return it for a refund. 

The only murky waters here is blending both private and business selling together on 1 account. That means if HMRC did investigate, they might consider your entire earnings on that account as business turnover (instead of letting you pick and choose what is business sales and what isn't). 

It's £1000 turnover, so before eBay fees, postage and so on. I.e you do £1000 in 'for profit' business sales, that's your 1k limit. Even though postage is say £100, eBay fees £150, cost of items £300 (leaving you with £450 profit), it's still 1k turnover. 

[yellowgallerybooks]

I set up an Ebay shop subscription after I retired in order to buy and sell to support my various hobbies and collecting obsessions. Since then I have made a small profit but always ploughed the proceeds back into the shop to continue doing what I enjoy. I never intended it to be a money-making venture and have clearly been very naive about the tax implications and have not kept detailed records of sales and purchases except what eBay provides online. I want to do the right thing so I have a few questions. If it's true that HMRC can go back through seven years of accounting history, I assume that the information will come via eBay and they will provide HMRC with what is legally required. However, I can only access detailed sales and purchase data from 2021 onwards. Will eBay provide me with data going further back than that, and if so how far? Also I presume I can unpick from my turnover all items of expenditure (fees, postage costs, packaging materials etc. etc.) and those sales which fall under HMRC's 'personal' category - ie transactions which constitute private sales of household items etc.  I changed over from a private selling account to a basic shop subscription but cannot recollect the date. Can eBay provide that as well? Thanks for your help. 

[*vyolla*]

@yellowgallerybooks 

I believe that you're worrying unnecesarily here, HMRC will only look at your selling history if they have a good reason to. They'll only go back if they suspect some major fraud. 

You're registered as a business and are presumably completing a tax return for 2022/23 which is due by 31st Jan 2024.

If you're selling 30 or more items a year OR have total earnings over the equivalent of £1,770. eBay will automatically share this information with HMRC by 31 January 2025 – the first lot of data-sharing will cover the current 2023/24 tax year.

[Anonymous]

Many thanks for the explanation. It seems I'm confusing turnover with profit and am somewhat naive re CGT.  All understood and very helpful.

[magpiecorner1]

Separate business items and personal items.

Further separate into items bought April 22 to March 23.

If the total business sales for that year is under £1000 (that's sales and postage charges), then you do nothing, unless you have other investments.  If you have already been asked to send in a self assessment for that year, due by 31 January, just tick the relevant box to inform HMRC that your business sales are below the £1000 threshold.  Otherwise, there is no requirement to inform HMRC, though wise to keep your records for 6 years.

If your business accounts for that year are over £1000, then you must get organised and set up a method on the HMRC website to access and complete a self assessment return, and to register as self employed.  The HMRC site is very helpful,  I have a Gateway account, but have no idea how HMRC set up accounts these days.  I'd advise engaging  an accountant if you are at all unsure.  Actually I'd go down that route anyway, you have very little time.

If you have PAYE earnings, these either need to be declared or will already be in your self assessment firm.  If you have a pension all payments to end March 2023 (actual end date is 5 April) will be shown already on your self assessment.  

Your payments due, if any, will be calculated by HMRC, and will include your personal allowance, usually but not always £12570. 

You only need to notify HMRC of your business sales and business costs.  There is a great deal of info about allowances, worth reading through everything carefully if you aren't engaging an accountant.

Also keep records of any business sales this year, if you don't need to register this year (23/24 because your business sales were under the threshold, make all your calculations again at the end of the tax year.  Do it in April, so that you fully understand what is required.

Good luck, main thing at the moment is if your business sales for 22/23 tax year is under £1000 - relax!

[magpiecorner1]

No it isn't!!!

Please don't give out misinformation in order to shock or frighten people!

If you don't have a business SPECIFICALLY selling second hand goods, or even more specifically selling the type of goods you have just bought, you can buy whatever you wish and sell it for whatever you wish, within whatever timescale you wish! 

If, when the item sells it sells for a profit greater that £6000, THEN you may be subject to CGT rules, depending what the item is.

Of course there are rules and regulations if you are selling lots of items, but making a profit and being a business is not always the same thing!

Scaremongering isn't very helpful!

[papso22]

I am afraid I think you are wrong here.

Trading is an activity, it's not something that you can choose to do only for a particular sector or a particular item to the exclusion of other things you buy to sell.

Introducing the idea of having a business that specifically does something so that your other buying to sell activities don't count, is misleading.

The mere act of buying something in order to sell it, is trading. 

[btr.style]

This!!!

Ignore the term 'business' as many see that as a shop on the high street or a unique website. 

Trading, reselling, profiting is all about the nature of how you've accumulated those goods. 

Free deals you've rinsed and then selling at profit.... It's business. A thrift at a charity shop....business. buying or making something to sell for profit.....business. 

If you aren't looking round your house/flat/bungalow to sell junk you no longer want. Then it's likely business selling. 

If I went into a shop, saw some cool game, bought it, listed it on eBay for double to price or for profit, then it would be business trading. 

The same scenario. I did that and then owned the game for a while. Then decided to get rid and it just so happened it's become sought after or rare so worth more money than I paid. That's not selling to profit. 

[litp*records]

---

@btr.style wrote:

This!!!

Ignore the term 'business' as many see that as a shop on the high street or a unique website. 

Trading, reselling, profiting is all about the nature of how you've accumulated those goods. 

Free deals you've rinsed and then selling at profit.... It's business. A thrift at a charity shop....business. buying or making something to sell for profit.....business. 

If you aren't looking round your house/flat/bungalow to sell junk you no longer want. Then it's likely business selling. 

If I went into a shop, saw some cool game, bought it, listed it on eBay for double to price or for profit, then it would be business trading. 

The same scenario. I did that and then owned the game for a while. Then decided to get rid and it just so happened it's become sought after or rare so worth more money than I paid. That's not selling to profit. 

---

...and you should also ignore the word "profit".  You can buy a ton of stock and sell it for half what you paid (plus all the overheads), which is still trading even though you've made a loss.

Trading is trading is trading

[moss_h]

So, I collected stamps as a child. 

Now a grown man, my wife wants rid of them. I have thousands of them.

So I've been slowly selling them on eBay for a number of years now. 

It turns out some are worth quite a bit of money so I'm likely to go over the £1700 limit each year. Im also well over the 30 items limit every month let alone year!

I collected these as a child so havent bought them to necessarily make a profit. Shall I be expecting a letter from HMRC?

[rainbowtrax]

If all you're doing is disposing of a childhood collection then you won't have tax due. Ebay have to pass on your sales details but HMRC shouldn't be interested in that. If you were buying and reselling then that's classed as trading and that's when tax would enter the equation, once you exceed the annual £1,000 trading allowance.

Essentially nothing has changed. What is taxable now, going forward, was taxable previously before the new reporting legislation. What is classed as trading for tax purposes is still exactly the same as before.

[sagr2519]

Are HMRC mind readers? How are they to know whether you bought it in order to sell, bought to use, inherited, collected and now need the space...

[rainbowtrax]

And that is the question that none of us know the answer to! At a guess, they're only likely to look in any depth if they think they have something to gain. On ebay for example, most accounts that are trading can be spotted in the space of a few seconds so, if they see something that raises a red flag in the first place, then it's really not difficult for them to find proof. What none of us know is at whom and how closely they'll be looking. Again, at a guess, they probably have some specific triggers known only to them. What we also don't know is what they accept as proof of not trading if they have you flagged as possibly owing tax.