Tax Implications And Guidelines For eBay Sellers

‍Selling your old or unloved items on eBay can be a cathartic experience; you’re clearing out the clutter, making some extra money, and sending your stuff to a new and happy home.

What you may not be aware of, however, is that in some instances, the taxman will want to know what you’ve been getting up to on eBay, and might even want a slice of the pie.

But where do we draw the line? Does everyone who sells anything on eBay have to let HMRC know what they’re selling and how much they’re making, or is there a line beneath which you can continue selling your old stuff tax-free?

In this article, we’ll cover the so-called ‘eBay tax’, who needs to take it into consideration, and how to let HMRC know about your sales.

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Who needs to pay tax on eBay sales?

The main rule of thumb here is that if you’re using eBay with the explicit desire to make enough profit to live on, you’re going to need to let HMRC know what you’ve been getting up to and how much you’ve been making.

It’s usually very unlikely that the items people sell on eBay are going to turn a profit for them – unless you’re sitting on a well-aged gem, like original print Pokémon cards which can fetch up to $7.4m.

If you’re selling old games, books, and clothes, for example, you’re likely only making back a small fraction of what you originally bought them for.

If you’re selling brand new items as part of a business, and you consider them ‘stock’ rather than ‘clutter’, then you need to let HMRC know what you’ve earned.

What is eBay tax?

eBay tax is something of a shorthand term, simply to mean ‘tax you need to pay after selling things on selling pages’.

Remember, the key here to identify whether your aim is to make a profit on what you’re selling, or to provide the bulk of your monthly/yearly income.

Whether you’re selling on eBay, Vinted, Gumtree, Facebook Marketplace or otherwise, they’re all subject to the so-called ‘eBay tax’ if your goal is to turn a profit on the goods you’re selling.

Is there a limit to how much I can earn on eBay before I have to pay tax?

This is a slightly complicated question to answer; on the one hand, Trading Allowance rules enable you to earn up to £1,000 a year from your eBay sales completely tax-free. That’s a good baseline to keep in mind if you’re starting up your own eBay selling page.

Thing is, just by decluttering your house, you may tip yourself over the £1,000 mark while still not intending to make it a business. So, while £1,000 a year is a good number to have in mind, it’s by no means a definitive answer to the original question.

Don’t forget that the Trading Allowance is not the same as Personal Allowance – that’s the threshold below which the earnings from your full-time income are not subject to income tax deductions.

If you’re in any doubt as to whether your eBay earnings require HMRC to know what’s up, we’d recommend filling in a Self Assessment just to be sure. Better safe than sorry, right?

Do I need to pay Capital Gains Tax on eBay sales?

This one’s a little more clear-cut, thankfully.

If you’ve found something in your attic which has only gone and sold for a tasty £3,000 or more, you’ll need to pay Capital Gains Tax on it.

The only exception to this rule is if you sell your car on eBay; vehicles are subject to a different set of rules, which HMRC detail more on their gov.uk website.

Can I claim expenses on eBay sales?

As ever with expenses, if you’re planning on claiming them, you have to be able to prove that they were solely purchased for the benefit of your business venture.

You can claim things like your postage and eBay selling fees as expenses, as well as packing supplies such as tape and boxes or jiffy bags.

If you have any standalone equipment that you use to shoot high-quality photos your items – like a manikin for clothes or even a lighting rig for your photo area – you’ve got a good chance of claiming those as well. Just make sure you can prove they’re exclusively for business purposes if HMRC decide to take issue with your claim.

Do I need to pay VAT on eBay sales?

There’s a chance, but it’s fairly unlikely.

You’ll have to register for VAT if:

• You earn over £85,000 from your self-employed venture (which you’re unlikely to achieve from eBay sales, though not impossible).
• You want to reclaim VAT that you’ve paid on other purchases (such as any VAT you’ve paid on the camera you use to shoot your eBay pictures, for example).

If you’re earning £85,000+ a year from eBay sales, then you absolutely should be VAT-registered, and you should be filing yearly Self Assessments.

What if I don’t tell HRMC about my eBay sales?

Then you may very well get an unexpected and unpleasant call from the taxman.

It all boils down to whether HMRC believe that you’re actively trading and making a living off of your eBay sales, but that line gets blurry when you’re making a considerable amount of money.

If your eBay sales are encroaching on the £1,000 a year mark, you should definitely look at filing a Self Assessment just to be safe.

Don’t forget, all of your eBay records are digitally available to HMRC if they decide to go looking for them, so you might as well err on the side of caution.

How can Crunch help me?

If you’re looking to file a Self Assessment, Crunch have got your back!

All you need to do is choose a Crunch accountancy package, and you can start uploading digital backups of all your eBay sales, invoices, bank statements and more to our secure online platform. It doesn’t matter whether you’re on our free package or one of our paid tiers – you get access to the same online accounting platform, no matter which package you choose!

If you do decide to take up a paid package, you’ll also gain access to our in-house accounting experts. They can help you manage your books, keep you up to date on upcoming tax deadlines, and even complete and file your Self Assessment tax return on your behalf.

All you need to do is keep a record of your incomings and outgoings, and our experts take care of the rest!

For more information about Crunch’s accountancy packages, check out our Pricing page, or give one of our friendly Sales team a call for a free consultation.