If you’re selling online then you might need to let HMRC know about it for tax purposes. It really depends on what you’re selling, how regularly, and how much you’re earning from it. It even depends on what your intentions are! For example, are you planning to make a profit, or are you just trying to declutter your wardrobe?
From selling the odd jumper that doesn’t fit you anymore, to running a business selling goods online, a whole spectrum of different scenarios might apply. Your unique circumstances will dictate whether you need to register with HMRC to pay tax.
We’ll go over the various rules and regulations around online selling so you can work out which compliance boxes to tick off.
What are the tax reporting rules if I sell on online marketplaces?
Due to the number of people using online marketplaces like Vinted, Depop, eBay, Etsy, and beyond to sell online, the marketplaces are legally obligated to tell HMRC about what you earn from selling through their platforms if you’re classed as an online trader.
These regulations don’t just deal with the sale of physical items. Providing services or renting out accommodation are also covered, so you might also be affected if you supply anything through the likes of Fiverr, Uber and Airbnb.
Am I classed as an online trader?
Online trading generally applies to those who sell with the intention of making a profit through selling things online.
This also includes those who buy items with the specific intention of reselling them on platforms like Vinted, Depop, eBay, and Etsy at a higher price. In HMRC terms you’re classed as an online seller if you:
- Make more than 30 sales
- Receive more than €2,000 (equal to around £1,700)
Being classed as an online trader doesn’t necessarily mean you’ll have a tax bill
Meeting the criteria above simply means you’ve hit the threshold for a marketplace to pass your details on to HMRC based on the sales you make through that platform.
It doesn’t necessarily mean you’ll need to pay tax on them. Likewise, being under the criteria doesn’t mean you won’t have to pay tax on your earnings! We’ll explain this next.
Do I need to register with HMRC as an online seller and pay tax?
You will need to register with HMRC and report what you get as an online seller if the total income you receive from self-employment or other miscellaneous activities is more than the £1,000 trading allowance.
This means you can earn up to the sum of £1,000 from self-employment or miscellaneous trading each tax year without telling HMRC, or paying tax on those earnings.
You can benefit from this allowance even if you earn money from other sources, such as employment. You could earn wages from a part-time job, for instance, and still use the trading allowance against the income you generate from a self-employment side hustle selling things online.
So, if you make 35 online sales, you might not necessarily need to pay tax on anything if the total amount you receive from them is less than £1,000.
What happens if I earn more than the trading allowance?
If the money you make is more than the £1,000 trading allowance, then you’ll need to register for self-employment and submit tax returns to HMRC.
It’s really important that you keep records of your sales so that you know when it’s time to register. And remember, you only get the allowance once in a year, not a separate allowance for each platform!
Keeping good records will also help you stay on top of your ecommerce expenses – that way you’ll be able to offset them against your tax bill.
Whatever your circumstances, you must make sure you’re doing everything by the book. Even if it’s just an honest mistake, missing deadlines or holding information back from HMRC can lead to serious trouble and hefty fines!
Understanding the rules and regulations around when to tell HMRC if you’re selling things online can be complicated. Check out our accounting support hub for more help, or to ask a tax question.
