There’s something really satisfying about decluttering - and with the rise of online marketplaces like Vinted or Depop it's simple to sell the your old stuff or unwanted gifts that is just too good to throw away. Plus there's the added bonus of cash in your pocket!
But are you aware that HMRC could see these sales as a 'side hustle' due to new reporting rules? No, then this article will explain what the new reporting rules mean for selling your clothes and unwanted items online.
🌸 What are the new reporting rules surrounding online marketplaces?
In a nutshell, starting from January 1st, 2024, online marketplaces such as Etsy, eBay and Vinted will be responsible for collecting data on how much their sellers earn.
HMRC have always been able to request this information and the rules regarding tax and selling online haven’t changed, but it’s now a legal requirement for digital platforms to collect this data along with information which will help them identify your tax records. The platforms you use to sell through will then automatically report the collected data to HMRC, starting from January 2025.
🌸 Will I be taxed for selling my old things online?
The short answer is 'maybe'. If you receive more than £1,000 of untaxed income from self-employment, property, capital gain or ‘miscellaneous’ income including online platforms in a tax year (6th April – 5th April) then you’re required to register for Self Assessment and submit tax returns.
However, if you sell items which you’ve had lying around your home – for example, an unwanted gift or a jumper that doesn’t fit anymore – it’s unlikely you’ll need to pay tax because you’ll be classed as an ‘occasional’ seller.
🌸 What is an occasional seller?
To be classed as an occasional seller you need to:
Have fewer than 30 sales
Receive no more than €2,000 (around £1,700)
🌸 Who is classed as an online trader?
There is no clear definition of what a ‘trader’ is, but there are ways to determine whether your activity is classed as trading. The two important things to look at are whether you intend to make a profit, as well as the number of transactions.
For example;
If you buy a dress for £40, and resell it for £100 as a one off deal, you are not an online trader. However, if you buy and resell clothes regularly on platforms like Vinted and make an income of over £1,000 each tax year, HMRC are likely to see you as trading.
If you make regular income from selling on online platforms, to the point where you consider it a ‘side hustle’, you’re most likely trading. If the total amount you make in a tax year is below the £1,000 trading allowance then you won’t need to register with HMRC or start sending tax returns, but over £1,000 you will.
🌸 Do I need to pay Capital Gains Tax if I sell stuff online?
It depends on what you’re selling. Capital Gains Tax is a tax on any profit you make when you sell something that’s increased in value. You’ll only be taxed on the ‘gain’ and not the full amount you’ve received.
For example;
If you bought a collector’s item for £2,000, and later sold it for £10,000, you’ve made a ‘gain’ of £8,000 (£10,000-£2,000).
Some assets are tax-free, so you won’t normally pay Capital Gains Tax on personal possessions worth less than £6,000 apart from your car. Your main home is also exempt.
You’re also exempt from paying Capital Gains tax if the total gains you make in a year are below the CGT tax-free allowance.
For the 2023/24 tax year (6th April 2023 – 5th April 2024) the allowance is:
£6,000 for individuals
£3,000 for trusts
🌸 Will HMRC be notified if I sell my stuff online?
If you make more than 30 transactions in one year, HMRC will be notified that you’re potentially acting as a trader – although it’s currently unclear whether those rules are for one platform or a total across all digital platforms.
Although HMRC will be notified, this doesn’t automatically mean you need to register for Self Assessment. If you occasionally sell some bits here and there or have an online business or hobby that earns under the trading allowance, you can continue as normal.
But if the income exceeds the trading allowance you would be best to seek advice on your personal circumstances from a qualified bookkeeper or accountant.
Our top tip is to keep meticulous records of your earnings from your online sales just in case HMRC do get in touch.
For more information: https://www.gov.uk/government/news/information-for-online-sellers
