Selling on Vinted, eBay, Etsy: When to Declare Earnings to HMRC
As spring arrives, many people embark on a thorough clearout, turning to online platforms such as Vinted, eBay, or Etsy to sell old clothes, toys, or gadgets. However, with online platforms now reporting seller activity to HM Revenue and Customs (HMRC), it is crucial to understand when you need to declare your earnings to avoid falling foul of tax rules.
Understanding the £1,000 Trading Allowance
The first key point to remember is that if you earn £1,000 or less from online sales within a tax year, you are likely exempt from declaring this income. This is due to the 'trading allowance' available to everyone. If your earnings exceed £1,000, whether you must declare them depends on several factors, which we will explore in detail.
When Selling Old Items Is Not Considered Trading
It is important to distinguish between selling personal items and engaging in trading. Trading involves working for yourself, including self-employment, casual work like babysitting, or buying and selling products with the intention of making a profit. Selling your old possessions, such as a child's toys or used clothing, is not considered trading because you did not originally purchase these items with the aim of reselling them for profit. Therefore, you typically do not need to declare this income to HMRC or pay tax on it.
Exceptions and Capital Gains Tax
There is an exception that may apply in rare cases: if you sell a single item for £6,000 or more, you might need to declare this to HMRC and potentially pay capital gains tax. The rules for this tax are more complex, and you can use the official tool on Gov.uk to check if declaration is required.
When You Must Declare Your Earnings
If you are buying or obtaining items with the intention of selling them for profit, this is classified as trading. Should your earnings from such activities exceed £1,000 within a tax year (which runs from 6 April to 5 April the following year), you must declare your earnings to HMRC by filing a self-assessment tax return. The trading allowance is £1,000 total across all trading activities. For instance, if you earn £800 from Vinted and £300 from eBay, you exceed the allowance and must declare the income.
For self-employed individuals, the situation can be more complicated. If you already use part of your trading allowance for other income, such as £950 from a dog walking business and £100 from Etsy sales, this combination surpasses the allowance, necessitating a declaration to HMRC.
Platform-Specific Account Requirements
It is also advisable to review the rules of your chosen selling platform. Some platforms require different account types for trading activities. For example, Vinted mandates a Vinted Pro account, eBay requires a Business Account, and Gumtree needs a Gumtree Business Account for those engaged in trading.
HMRC's Reporting Rules for Online Platforms
Since January 2024, online platforms have been obligated to collect data on users' selling activity. This data is shared annually with HMRC, making compliance with tax rules even more critical. Your activity will be reported to HMRC if you make 30 or more sales or earn €2,000 (approximately £1,736) within a calendar year.
However, meeting this threshold does not automatically mean you owe tax. For example, if you sell 30 items during a clearout but are not trading, you are not required to pay tax simply because the platform reported your activity. Conversely, if you sell 29 handmade candles on Etsy for £40 each, your activity may not be automatically reported, but since you earned over £1,000 from self-employment, you must still file a self-assessment tax return.
Staying informed about these regulations ensures you can sell online confidently and legally, avoiding potential penalties from HMRC.
