If you sell things online through sites such as Amazon marketplace or eBay, you may need to pay tax. You don’t need to worry about it if you only sell items you already own and no longer use, but if you sell things to make a profit, you should tell HM Revenue and Customs. Here’s what you need to know.
1. I’ve sold a few things I’ve not needed. Does that mean I’m a trader?
If you’ve sold some things you no longer need, you won’t be treated as a trader. The key difference comes down to whether you sell things you’ve bought specifically to sell on or whether you sell things you don’t need anymore (such as baby items etc).
2. Where can I find information to help me work out whether or not I’m a trader?
HM Revenue and Customs ran a campaign a while ago giving online sellers a chance to tell it about money they earned from their online sales. At the time it included some information to help you work out whether or not you were classed as a trader. It included questions such as:
Q. How and why did you get the things you’re selling?
A. You bought them to sell on and make a profit (you’re probably a trader)
B. You’re selling personal possessions, things you were given or things you’ve inherited (you’re probably not a trader)
Q. How often do you sell things?
A. You make regular sales (you’re probably a trader)
B. You’ve only made one sale and don’t think you’ll make another one (you’re probably not a trader).
SAVVY TIP: You can download a guide to paying tax if you buy and sell things at home from the Gov.uk website.
3. How will HM Revenue and Customs know I’ve been trading?
It’s not guaranteed to know, but it has asked Amazon and eBay to give it the names of tens of thousands of people who sell online regularly. It is also apparently going to start getting information from Paypal about transactions and from this it could work out the income someone may have received. HMRC has already written to thousands of people who’ve been selling online.
4. I’m thinking of setting up as an online trader. What should I do about my tax?
If you want to sell things online, you should tell HM Revenue and Customs about income you’re receiving so you can pay tax on it through self assessment. If you already fill in a self assessment form, perhaps because you work for yourself, you will need to give extra information relating to money you make from selling online.
5. What information do I need to keep?
You should keep a record of all your sales and any associated expenses. Make sure you keep receipts and bills or statements that are for your business. You can also claim a mileage allowance for when you use your car for your business. Keep a record of the miles you’ve done, what they were for and when you made the trip.
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