HMRC has published new guidance for taxpayers that regularly sell goods or services through an online marketplace. The guidance makes it clear that this activity could be treated as a ‘trade’ for UK tax purposes. If this is the case taxpayers may need to pay tax on income they earn from buying and selling goods as a trade or business using online marketplaces such as eBay.
If taxpayers are just selling unwanted items that have been laying around their home, such as the contents of a loft or garage, it is unlikely that they will have to pay tax. However, if they buy goods for resale, or make goods with the intention of selling them for a profit, then they are likely to be trading and will have to pay tax on their profits.
There is also a £1,000 tax allowance for miscellaneous trading income. This is known as the Trading and Miscellaneous Income Allowance. Where this £1,000 allowance covers all the individual’s relevant income (before expenses) the income is tax-free and does not have to be declared to HMRC.
Traders should note that since 1 January 2024, digital platforms are required to collect and report seller information and income to HMRC. These digital platforms must report sellers’ income by January 2025. The changes are an internationally agreed set of rules requiring digital platforms to report certain information to HMRC.
If you have trading income from online sales and are unsure what, if anything, you need to declare, please call so we can help you consider your options.