As of 2024, new reporting requirements mean that digital platforms such as Amazon, eBay, Vinted and Etsy must now share information with HMRC about sellers using their platforms.
Fast forward to the Spring Statement, and the Chancellor has laid out a clear commitment to a crack down on tax non-compliance, including inaccuracies in tax returns and the associated penalties. In tandem, HMRC is also modernising how it acquires and uses third-party data in a bid to make it easier for taxpayers to declare income.
Knowing the rules around online trading is therefore more important than ever, especially as part of a broader international effort to improve tax transparency and ensure that income earned online doesn’t go undeclared.
Who is affected?
If you’re a casual seller clearing out your home, don’t panic. The rules only apply if you:
- Made more than 30 sales in a calendar year, and
- Earned more than €2,000 (approx. £1,700) from those sales.
If both thresholds are met, the platform is required to report your sales activity to HMRC.
This does not mean you automatically owe tax. The new rules strengthen HMRC’s data collection powers but do not create new tax obligations. What they do mean is that if you are trading online and haven’t been declaring your income, HMRC is more likely to find out.
Selling vs. Trading
One of the biggest areas of confusion stems from the distinction between selling and trading. According to HMRC:
“Selling stuff for some extra money might just feel like a fun hobby you do on the side, but it could also count as something HMRC calls ‘trading’.”
So, what’s the difference?
- Selling: Occasionally selling unwanted personal items like clothes, books or gadgets? It’s unlikely you’ll need to pay any tax on this.
- Trading: Regularly buying items with the intention of selling them at a profit, or producing goods to sell? This may count as a business and could be taxable.
If you’re unsure whether your activity counts as ‘trading’, consider:
- Are you making items to sell?
- Are you buying with the intention to resell?
- Are you making sales regularly and aiming for profit?
If the answer to these is yes, then you’re likely trading in HMRC’s eyes.
The £1,000 Trading Allowance
Even if your activity qualifies as trading, you may not need to pay tax. The trading allowance allows individuals to earn up to £1,000 per tax year from self-employed or trading income without having to report it to HMRC.
If your trading income exceeds £1,000, you must register for Self-Assessment and declare the income, even if you make a loss overall.
Getting it right
Since the announcement last year, there has been a lot of misinformation online suggesting that people will be taxed for selling old clothes or unwanted household items. This isn’t true. If you’re just having a clear-out, you likely have nothing to worry about.
However, if you’ve turned your side hustle into something more regular or profitable, now is a good time to get your records in order and ensure you’re on the right side of the rules.
How can we help?
Whether you’re unsure about what counts as trading or need help with Self-Assessment, our tax team is here to support you. Contact your usual relationship partner, email us at tax@haroldsharp.co.uk or call 0161 905 1616.