Selling handmade crafts or second-hand clothes online might feel like a smart way to make some extra cash, but did you know your hobby could land you a tax bill from HMRC? Whether you’re selling on eBay, Etsy or even through social media, you need to know your tax obligations before you start making money online.
As soon as your online sales start making a profit, HMRC will see this as trading activity, and you may have to pay tax. This includes any income over the £1,000 trading allowance (2024/25). You may have to pay Income Tax or Capital Gains Tax, which you can report on a Self-Assessment tax return.
Do I have to pay tax when selling personal items in the UK?
If you make regular online sales that generate a profit, then HMRC will likely see this as trading activity and have every right to charge tax. There are some rules and exceptions, though, so don’t worry if you’re just clearing out your attic.
Since January 2024, HMRC has been cracking down on online sellers using sites like eBay, Vinted and Etsy to sell old clothes, homeware or even handmade items. Their main target is people who intentionally want to make a profit (such as from reselling vintage clothes or selling downloadable digital prints). But you should still err on the side of caution if your online sales are just a hobby.
At Archimedia, we’re experienced eCommerce accountants. We help many online sellers work out their tax liability and stay compliant when selling goods online. If you’re noticing an upward trend in your online sales, you might need to let HMRC know. Give us a call on 0115 922 6282 or fill out our contact form for a friendly chat.
At what point do you start paying tax for selling online?
When you start out selling items online, if it’s just the odd sale here or there, it is unlikely that you will need to pay tax straight away. It’s when those one-off sales turn into trading income (i.e., you intentionally set out to make a profit) that you have to let the authorities know.
You are technically classed as a trader (making self-employed income) when your sales exceed £1,000 (2024/25), which is also known as your ‘trading allowance’. If your total earnings from online sales is less than £1,000 during the tax year (before deductions have been made), then you won’t have to pay tax on this income.
HMRC can now access your sales data from online platforms like eBay and Etsy. This means they can easily spot if you go over their tax-free trading allowance.
Taxes online sellers should be aware of
If you think your crafty hobby could become more of a side hustle, then you need to be aware of the different taxes you might encounter.
Income Tax
All UK taxpayers must pay Income Tax on their earnings, whether from employment, self-employment or a side hustle, such as making regular online sales. If you earn over £1,000 in any tax year from your online sales, you’ll need to report this on your Self-Assessment tax return and pay the tax due.
Capital Gains Tax
If you sell a personal item for more than £6,000 (such as a piece of jewellery or a rare coin), you may have to pay Capital Gains Tax on the profit. This doesn’t include your car or items with a ‘limited lifespan’ of less than 50 years.
You need to work out your ‘gain’ by deducting the cost of the item from the sale price. You can also deduct certain costs that contributed to the sale, such as valuing the item or improving it.
Once you have calculated the gain, you can report it on your Self-Assessment tax return and pay any tax due. You may need to provide additional information about the item, including dates, purchase price and other important details.
Ready to turn your hobby into a business? Get in touch with Archimedia Accounts
Whether you’re selling handmade items or vintage finds, making the switch from hobby to business can feel like an impossible change. But, as the saying goes:
“If you love what you do, you’ll never work a day in your life!”
At Archimedia Accounts, we make sure you don’t have to do it alone. We’re a family-run accountancy firm, so we know a thing or two about turning passion into profit. We’ll be there to guide you through the process, from notifying HMRC to managing your taxable income.
Contact us today to discuss how you can turn your casual sales into a profitable business.
Frequently asked questions about online sales tax
Do I need to pay tax on selling second-hand items?
If you’re making the odd sale online from old clothes or furniture you no longer need, then it’s unlikely that you’ll have to pay tax on those sales. However, if you’re intentionally buying items to sell for a profit online, it’s technically classed as trading, and HMRC will expect you to report your earnings and pay taxes.
Can I sell things I make as a hobby?
Yes, you can absolutely sell things you make as a hobby; in fact, this is how many entrepreneurs start out. If your sales earn over the £1,000 trading allowance (2024/25), then you will need to report this on a Self-Assessment tax return and pay Income Tax.
Can I sell things without being a business?
If you need to get rid of some old belongings on eBay, then it’s fine to do this without having an online business. But, if you want to make regular sales and start generating a profit, it’s best to let HMRC know to ensure you comply with your legal and tax obligations.
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