Paying tax on eBay income


“I make a small profit from buying and selling on eBay. Do I have to pay tax, and if so, how do I go about it?”

All figures have been updated for eBay sellers starting in the tax year ending 5 April 2015, who will be required to submit their first tax return by 31 January 2016.

Do the eBay earnings constitute a business?

Sale stickerFirst of all, you are liable to pay income tax on the profits from a business, also called a trade. You are not liable to pay income tax on profits made from selling unwanted items which were bought for private, personal use (though very occasionally capital gains tax may be payable).

The difference between a business and personal buying and selling is not always clear-cut. In borderline cases, the tax office will look at a combination of factors to decide on your status. The main issues to consider are:

- What was the item, and what was your motivation for buying it?
- What was the item used for before it was sold?
- How much time elapsed between buying and selling?
- What was your motivation for selling the item?
- Was it an isolated transaction, or one of a repeated series of similar transactions?
- How often do you buy and sell items?
- Is your buying and selling organised like a business?

You cannot avoid paying tax on your eBay activities simply by labelling it your “hobby”, if the reality is that it is more like a business. It is also irrelevant whether you are registered as a private seller or as a business on the eBay website.

If your tax-free personal allowance of £10,000 is being fully used by your full-time job, there is no small earnings allowance or exemption for eBay below which all tax obligations can be ignored.

In straightforward cases, the eBay account, PayPal account and linked bank account will be in the name of the person running the business. In other cases, where someone is using someone else’s account to run the business, it is more complicated. The person liable to pay the tax is generally the person who is entitled to the income from it, but if you are going to use an arrangement like this, you probably need specific professional advice. Doing all the work for a business, and then transferring all the income to someone else’s bank account in order to change who is paying the tax arising on the income, is far from straightforward (if possible at all), and well beyond the scope of this page.

Registering to pay tax

If you establish that the eBay income does in fact represent a business, you need to register that business with the tax office. Registering is very straightforward, and can be done online on this page of the HMRC website. You only register as a self-employed person once, regardless of how many different businesses or online business names you go on to have.

Self-employed people usually have to pay Class 2 National Insurance contributions at a rate of £2.75 per week (in practice they are now paid yearly or 6-monthly, with your tax). However, if expect your eBay income together with any other self-employed income to be less than £5,885 per year, you will can apply for an exemption. More about Class 2 National Insurance.



Once registered, you will be allocated a Unique Taxpayer Reference (UTR) number, unless you already have one. You will then be sent a self-assessment tax return in April every year, on which to report all your income for the tax year that has just finished. You will need to keep records of your business income and expenses so that the tax return can be completed. You can choose to prepare your business accounts to any date each year, rather than having to use the anniversary of when the business started. 31 March or 5 April are the simplest options for tax purposes, so most people opt for either of those.

Am I old enough to pay tax?

You have to pay tax whatever your age, if you earn enough in a tax year, which runs from 6 April to 5 April. There are no special exemptions for children or students. Age is mostly irrelevant in working out tax, though people aged over 65 are entitled to some minor additional tax allowances.

People aged under 16 at the start of the tax year are exempt from having to pay Class 4 National Insurance on their business profits for the whole of that tax year.

How to work out your taxable income

In working out the tax, you generally start with your eBay sales. The figure to use on your accounts and tax return is the one before all eBay and PayPal charges have been deducted. You then deduct all allowable expenses such as the cost of the goods you have sold (whether from eBay or elsewhere), and admin expenses such as eBay charges and computer expenses. You may also have some travelling expenses and premises costs to deduct. This leaves your taxable profit, which is the amount you potentially pay tax on.

When working out your profits on which tax is payable, 2 common mistakes are:

  1. Thinking that if all income is reinvested back into stock, there are no profits and so no tax to pay. In fact, buying stock is a payment, but not an expense. It only becomes an expense when you no longer have it, usually because you have sold it. You pay tax based on profits, not payments.
  2. Thinking that if all income is left in a business bank account or a PayPal account, there are no wages/drawings, and so no tax to pay. In fact, with self-employment there is no distinction between business money and private money, so there is no question of paying yourself a “wage”. You pay tax on profits as they are earned, regardless of how you transfer your own money around.

Starting from the tax year ended 5 April 2014, most small businesses have been allowed to submit tax figures on a cash basis. This means that you work out your income using payments and receipts, without having to make adjustments for stock in hand, or other accounting adjustments which allocate income more realistically between different years.

You have to opt in to using this method on the tax return, and it comes with some drawbacks, such as not being able to offset any “losses” against other income, and not being able to claim expenses until you have actually paid for them.

Using this method will result in paying lower tax when your stock is increasing, and paying more tax when your stock is going down. Over the lifetime of the business, it shouldn’t make any overall difference.

How much will the tax be?

If you have no other income, and your eBay income is over £10,000, there will be tax to pay, but only on any income above £10,000. The first £31,865 of income over £10,000 will be taxed at 20%, and the balance at 40%. 45% tax is due on any income over £150,000.

Additionally, you pay Class 4 National Insurance on your self-employed earnings at a rate of 9% on any income between £7,956 and £41,865 in a year, and 2% on any income over £41,865.

If you have another job, whether part-time or full-time, the tax calculation is more complicated. You do not get a separate tax allowance for each source of income. You may find this page helpful: Tax on self-employment income while remaining employed.

When will the tax have to be paid?

The total tax and Class 4 National Insurance on your self-employed income (together with any other minor tax adjustments that get sorted out on the annual tax return) is usually payable by 31 January after the end of the tax year. So, if you started your eBay business in October 2014, this falls in the tax year to 5 April 2015, and the tax on the business income up to 5 April 2015 will be payable by 31 January 2016.

If the tax and Class 4 NI payable in a year is over £1,000, you may have to start making advance payments on account of tax every 6 months.

Simple example for first year of business

The business starts in June 2014. Assume no other income, or complications.
Profit from business in year to 5 April 2015 = £15,000.
Income liable to tax = £15,000 - £10,000 = £5,000.
Tax at 20% = £1,000.00.
Profit liable to Class 4 NI = £15,000 - £7,956 = £7,044.
Class 4 NI at 9% = £633.96.
Combined amount payable by 31 January 2016 = £1,633.96.
As this is more than £1,000, a payment on account of 50% (=£816.98) is also needed on 31 January 2016 and 31 July 2016, unless your tax liability will be lower in 2015/16.

See also: VAT and your eBay business




131 Comments (oldest first)

  1. Jake Lowe

    My total profit on eBay in one year is around £2,500, Do I have to pay tax on this or is it only on my profit if its over £7,225?

    18 November 2012

  2. Admin

    It depends on whether you have any other income; see http://www.brighton-accountants.com/blog/tax-self-employment-still-employed/.

    18 November 2012

  3. Jake Lowe

    I don’t have any other income. Just est £2,500 I make on eBay in a year. Which is below my personal allowance, So is tax compulsory on this.

    23 November 2012

  4. Admin

    No. In that case it is covered by the personal allowance.

    24 November 2012

  5. Bill

    Hi this looks a great blog and very helpful. I wondered if you could help me. I bought and sold quite a few assets this year. I am not registered as a business so would I just pay capital gains on the profit? I don’t want to set up a business because my current employer would not like it if they found out. Although as you say above sometimes there has not been not much time between buying and selling; so I guess it looks quite clear to the tax man that they were intentionally bought to be sold in a business way. Do I have a choice in paying capital gains or income tax?

    22 December 2012

  6. Admin

    There is no free choice on whether to pay capital gains tax or income tax, based on past events. It is determined by the facts. Not registering with HMRC as a business is a potential tax compliance failure rather than a deciding factor in what type of tax you pay.

    If you particularly wanted your activities to be charged to one type of tax rather than another, the best you can do is in future, structure your trades so that they fit the criteria for that tax. This will probably mean big compromises in what you do, and you should not let the tax tail wag the business dog, so to speak.

    22 December 2012

  7. Memphis

    Hi
    I have found this blog very helpful as I have been struggling with how to go about paying my tax for the items I sell on eBay. At first it started as a one off thing selling one item every now and then but soon became a regular thing and I register as a business seller. I have got a full time job and the eBay business is a thing I do on the side. My question is… I know all my expenses for the eBay business, after deducting this from my profit, have I got to show the evidence of expenses when paying my tax? If so how? And are my earnings from my full time job added to the profit tax to be paid?

    Thank you.

    8 January 2013

  8. Admin

    You don’t send off the evidence of your expenses when you submit your tax return, but you may be asked for it at a later date, so you should ensure that you have some record or evidence for every expense, and keep it safe.

    8 January 2013

  9. Ralph

    How much per mile would be reasonable to charge on trips to the post office considering that some coincide with personal use and how much of my £25 broadband bill could I claim back.

    Thanks for this and the info already supplied.

    10 January 2013

  10. Admin

    Since everyone has different usage patterns, I cannot say. You will have to work out your own business proportions.

    10 January 2013

  11. Memphis

    Dear Admin
    I have been selling items on ebay for about 5 to 6 months now….is the January 31 deadline applicable to me or I can register at a later date?

    Thank you.

    14 January 2013

  12. Admin

    You should register straightaway, but you will not need to do a tax return this month.

    14 January 2013

  13. Rhymsta

    Great blog! Just wondering if an eBay business could be shared with your spouse thus doubling the amount of profit that could be made before tax?

    16 February 2013

  14. Admin

    Yes, you can be a partnership if your spouse has a role in the business. But you will only be “doubling the amount of profit that could be made before tax” if neither of you has any other taxable income (or, by chance, you both have exactly the same amount of other taxable income).

    18 February 2013

  15. Louise Biddington

    Thank you for this, it has been really helpful! I work part time, 3 days a week, I get paid per hour so I cannot give an exact figure of ’salary’ because sometimes I work more often in the holidays etc. In my tax return do I have to state my part time earnings from employment? Or will they take it from my NI number? Also are ebay and paypal fees to be taken off as expenses?

    28 March 2013

  16. Admin

    “In my tax return do I have to state my part time earnings from employment?”

    Yes.

    “Or will they take it from my NI number?”

    No, but your employer must give you a P60 certificate at the end of the year which summarises your taxable income for the year.

    “Also are ebay and paypal fees to be taken off as expenses?”

    Yes.

    29 March 2013

  17. George

    Hi. I’m self employed and have regular income (about 24k a year) but recently (about 6 months now) I do buy to sell stuff on ebay as well. I understand I don’t have to do any separate registration with IR as I’m self employed already and it will be enough to fill out separate self assessment form. For all transactions on ebay I’ve used Paypal and from time to time transfer some money from or to my bank account. Just wanted to ask, when calculating my turnover and taxable profit, should that be based on my Paypal/ebay statement or my regular bank account statement?

    29 March 2013

  18. Admin

    Your profit is not based directly on either set of statements; it is based on the profit you make on what you sell, less overheads. You appear to be confusing expenses with payments; they are not the same thing.

    29 March 2013

  19. George

    Thank you for fast reply.
    If I buy mobile phone for £100 and sell it for £150. That £50 is profit and turnover is £250 isn’t it?

    29 March 2013

  20. Admin

    No, the turnover would be £150.

    29 March 2013

  21. Trish

    My daughter and I wish to start an eBay business together. We plan to use my daughter’s existing eBay account as it is established from buying and selling personal items over the years. My daughter works full time, I am not working therefore I will probably do majority of the work but I am more than happy for the profits to be 50/50 as we will both put the same capital sum into the business. The existing PayPal account that is linked to the eBay account is through my daughter’s bank. Do we register with HMRC separately or are we able to register the business as a partnership even though the eBay and PayPal accounts are in my daughter’s name.

    15 June 2013

  22. Admin

    Well, yes, you can register and run a partnership through an individual’s account, but this would be a slightly awkward arrangement so you would need to get all of the details right. For instance, entitlement to income, and legal liability. If you are going to run it that way, I think you need specific professional advice.

    15 June 2013

  23. Trish

    Thank you for your speedy reply. Who do you think would be best to contact for professional advice?

    15 June 2013

  24. Admin

    Certainly an accountant. If the business is big enough, you should also consider consulting a solicitor about a partnership agreement.

    16 June 2013

  25. Tom

    Hi, Great site!! I have started a small on-line business selling watches. I have registered the business and I am also in full time employment, but my combine earnings still keep me under the 40% tax bracket. Am I right in think I work out tax as follows. Example: I buy a watch for £150, I then sell it for £300. The majority of my sales are on ebay, so first of all I deduct the ebay and paypal fees, in this example it would be 13% or £39, I then deduct the amount I purchased the item for, £150. This leaves my profit as £111. I then work out 20% tax from this, £22.20. This means my final profit would be £88.80. Please can you confirm I am working this out correctly???

    1 July 2013

  26. Admin

    Your calculation is correct.

    2 July 2013

  27. Johnny

    Hi there,

    I’m already registered with HMRC for couple of years because I have some extra online income from few websites.

    This year I started to sell on eBay using Paypal as payment processor. Once per month I withdraw the money to my business account.

    My question is, may I use the withdraws in the tax return as an income to keep it simple? Or do I have to print everything from Paypal, deduct Paypal fees to each sale, deduct postage (paid by Paypal), deduct eBay fees (paid by Paypal), etc.

    My theory is that Paypal is just credit and it transfer to real money once it’s moved to the bank account. Am I completely wrong?

    Thanks Johnny.

    5 July 2013

  28. Admin

    “My theory is that Paypal is just credit and it transfer to real money once it’s moved to the bank account.”

    That’s not really correct. PayPal might not be a current account with a high street bank, but it is still your money. Your profit is based on the underlying transactions rather than bank payments and receipts, and you still need to show your turnover and expenses as separate figures, so you are going to have to work it out properly. It should be easy enough, if you can download it all from PayPal in a spreadsheet format.

    5 July 2013

  29. Sunny

    My Wife has recently started selling on ebay using my ebay and paypal account due to well established ebay account I have. I work full-time and pay 20% tax as per usual. My question is do I have to declare tax for the ebay sales under my name as the account is in my name or does my wife register herself with HMRC as self employed and can carry on using my account and pay tax on the profit earned on ebay. Please advise.

    Thanks

    18 September 2013

  30. Admin

    It depends on who has the beneficial entitlement to the income.

    Again, if you are going to run your business that way, I think you need specific professional advice.

    19 September 2013

  31. Rapidz

    Hey, i am confused. If i sign up for self employed.

    If i make £3000 in the first year. Do i pay tax or NI fees as its below my personal allowance? And does your personal allowance rest every year?

    14 October 2013

  32. Admin

    “If i make £3000 in the first year. Do i pay tax or NI fees as its below my personal allowance?”

    No, assuming that you have no other taxable income.

    “And does your personal allowance rest every year?”

    You get a new personal allowance every year, if that is what you mean. It does not get carried forward.

    15 October 2013

  33. Darren

    Hi there,

    I’ve just setup my own vehicle\car part selling business. I wanted to know if I use profit from my business to buy more stock can I put this against my tax?
    And If these are cash sales can I write my own cash receipts for them? (I deal with a lot of scrap yards and buy old core\exchange items from garages etc)

    Thank you in advance.

    3 November 2013

  34. Admin

    “I’ve just setup my own vehicle\car part selling business. I wanted to know if I use profit from my business to buy more stock can I put this against my tax?”

    No. As above: “When working out your profits on which tax is payable, 2 common mistakes are:

    1. Thinking that if all income is reinvested back into stock, there are no profits and so no tax to pay. In fact, buying stock is a payment, but not an expense. It only becomes an expense when you no longer have it, usually because you have sold it. You pay tax based on profits, not payments.”

    “And If these are cash sales can I write my own cash receipts for them?”

    That is better than nothing, but third party paperwork would be better still.

    3 November 2013

  35. Jason Brannagan

    Hi there

    I have been selling low value items on ebay now for a few months and as I have been buying stock to resell, it is clear that I must register with HMRC for Self Assessment.

    I have looked at the SA100 form to see what it would involve and I am unsure if the SA108 supplementary pages would be appropriate for ebay sales. Can you clarify please?

    Thank you

    11 November 2013

  36. Admin

    SA108 is to report capital gains. This would apply where you have invested in an asset (typically property or shares), held or used it for some time, then sold it for more than it cost. As an eBay trader, this is unlikely to apply to you. Instead, report your income using the Self Employment pages (SA103).

    11 November 2013

  37. Linz

    Hi, thanks for the great blog! Can you tell me, if I work part time and earn around £3000 a year, then my ebay business earns £3000-£3500. Do I still pay NI as I am below the threshold of allowance?

    Thanks

    12 December 2013

  38. Admin

    You would not pay any NI, as your employment income is below the Class 1 NI threshold, and your self-employment income is below the Class 2 and Class 4 NI thresholds.

    12 December 2013

  39. mc

    Hi, I buy and sell on ebay. My stock is primarily purchased from bootsales, so I do not have any receipts to prove the purchases were made. Instead I’ve been advised to keep a detailed list of what I purchase, and where and when (which I do).

    Some of the stock I purchase turns out to be unsellable and so has to be written off. My question is, am I able to claim some or all of the costs incurred to purchase these unsellable items as an expense, given that I can’t prove I actually purchased them? I remember reading somewhere that you could claim a portion.

    Thanks

    7 January 2014

  40. Admin

    Regardless of whether stock is sold or scrapped, as long as it was bought for the business, it is allowable in full. However, if you remove it from the business in order to use it personally, you must enter that as a full-value sale to yourself in your business records.

    The question of proof of purchase is a separate one. If you cannot get a proper receipt, then your own record should be OK, but it makes defending your accounts more difficult if there are unusual or doubtful items claimed, and HMRC ask about them.

    7 January 2014

  41. Nick

    I work full time as a sheet metal worker and will earn £35,000. I would like to set up my own part business on the side, so I will register as a sole trader. I expect to make £3,000 profit. Do I get a separate tax allowance for my own business or will I have to pay 40% tax as my total income will be in the higher tax bracket? Please advise, thank you in advance. My full time employer is happy for me to do this. Also if I bought equipment for my hobby and now use it mainly for business can I add this to my expenses?

    16 February 2014

  42. Admin

    “Do I get a separate tax allowance for my own business…”

    No.

    “…or will I have to pay 40% tax as my total income will be in the higher tax bracket?”

    No, your combined income is not high enough to reach the higher tax bracket. You may find this page helpful in working out your tax when you also have a job.

    “Also if I bought equipment for my hobby and now use it mainly for business can I add this to my expenses?”

    No, but you will be able to claim capital allowances at 18% on the reducing value each year, based on the value of the equipment when it was first used for business, which is likely to be less than its original cost.

    16 February 2014

  43. david

    My wife has a small ebay business making about £5000.00 per year profit, it’s her only income, I work paying 20% basic tax. Does she need to pay tax on this then claim a rebate? The money is currently paid through my bank account and given to her as it was my ebay account. What should I do before I get a knock on the door?

    3 March 2014

  44. Admin

    Assuming your wife is entitled to the money going into your account, I don’t see the problem. She won’t pay any tax.

    3 March 2014

  45. David Neil

    Hi, I have a small eBay Business and store my stock and work in my bedroom. Do I have to pay for Business Rates? If so how much, I only use a small section of my bedroom.

    5 March 2014

  46. Admin

    Different councils have different rules, but the usual situation is that you only have to pay business rates if you have customers or employees calling at your house.

    5 March 2014

  47. Diane

    I am a stay at home mum of 3 while my husband works full time.

    I recently listed some items on ebay and made about £1200 which I transferred from paypal to my bank account. Do I have to register as a business and pay taxes or can I continue selling as long as I stay below my personal allowance. I have some more of the same products I would like to sell on ebay but worried the taxman will be knocking on my door.

    5 March 2014

  48. Admin

    You can continue selling as long as your total taxable income is below your personal allowance, and your business profits are below the Class 2 National Insurance limit of £5,725.

    6 March 2014

  49. Liam Jones

    When keeping records, Do you need receipts of every purchase and sale or could you simply print off a monthly report from PayPal which shows income and expenditure and use this information when submitting a self assessment.

    11 March 2014

  50. Admin

    PayPal is quite a good record of your business, but it is not perfect. For example, you probably have some additional expenses which you did not pay for using PayPal. Also you might have some payments on PayPal where it is not clear what they are for - for example, a payment to Amazon could be for almost anything. It is therefore recommended that you also keep receipts for your expenses.

    11 March 2014

  51. Liam Jones

    What about my sales. Which specific details are required, are basic details okay for example date sold, item sold, and price. Or do I need full details e.g buyer name and address. I do have a lot of transactions you see.

    11 March 2014

  52. Admin

    Only basic details are needed for sales.

    12 March 2014

  53. Simon

    Just a quick question.

    If I use my paypal account for all money coming in from my eBay sales. Can I just print off the monthly paypal sales reports as evidence of my eBay sales? If so I am thinking this would save a lot of time as it also lists your eBay fees paid under amount sent, fees paid and any refunds.

    Thank you

    13 April 2014

  54. Admin

    Yes, that sounds like a very good record of your sales and transactions costs.

    13 April 2014

  55. melanie

    Hi there, I have started listing some items that I have made they are flower arrangements. I haven’t sold any yet. Do I need to declare that I’m doing this before I have even sold anything never mind even making a profit to which I will be only covering costs.

    1 May 2014

  56. Admin

    If you are marketing your products, and you are in a position to supply them, then your business has started for tax purposes.

    1 May 2014

  57. John

    Hello,
    I’ve recently stated buying bundles of cards on ebay, taking the ones out that i want for my personal collection, then selling the unwanted cards so i can rinse and repeat this process. I’m currently unemployed and do make a small profit from this. My question is: Do i need to declare this and pay tax, even though my primary focus is to build my own collection?
    Thanks

    22 May 2014

  58. Admin

    It is possible that this would be viewed as an organised business, but it is also possible that it would be viewed as disposing of unwanted personal items. That is not a black-and-white issue that I can decide for you, so you will have to look at the 7 tests at the top of the page and reach your own conclusion. Alternatively, an accountant will stick their neck out and give you an opinion if you provide them with a lot more information, and pay them.

    22 May 2014

  59. Darren

    Hi,

    I was made redundant in June 2013 and since then I’ve been selling my own personal collection of old collectible video games on Ebay. The total sales have been in the region of £6,000 - £7,000. Most of the items were bought 10-15 years ago and I have no record of what they cost, however at a guess I would say that I’ve sold about 75% of them for less than I bought them for. Where do I stand tax wise?

    I am registered as self-employed and do other work that takes me over my tax allowance I which pay tax on. Cheers.

    26 May 2014

  60. Admin

    That doesn’t sound like a business, and capital gains tax would not be applicable, so there are no tax implications.

    27 May 2014

  61. Micky123

    Hi,

    I have a few questions in regards to a business I’ve been running for approx 12 months which is expanding therefore I would really appreciate help. What makes things confusing is that I have used my own personal money to fund the business as the sales income has been locked in PayPal until now.

    Please could you advise on the following:

    1. I have funded a substantial amount or savings into stock, rent, tools and equipment. Rent can be seen debited from my personal bank account as can eBay fees, courier costs etc. How do I register this and obtain the money back from the business?

    2. Over 75% of our stock is purchased from salvage merchants, scrap dealers, eBay sellers or people from their homes. This is making it very difficult for us to obtain receipts, what’s your suggestions on this?

    Thanks and please note our appreciation to starting an excellent blog to help the ambitious!

    Cheers

    31 May 2014

  62. Admin

    “What makes things confusing is that I have used my own personal money to fund the business as the sales income has been locked in PayPal until now.

    Please could you advise on the following:

    1. I have funded a substantial amount or savings into stock, rent, tools and equipment. Rent can be seen debited from my personal bank account as can eBay fees, courier costs etc. How do I register this and obtain the money back from the business?”

    Unless you are trading as a limited company, there is no distinction between business money and personal money. It is all your money, regardless of whether it is in a “business” bank account, a “personal” bank account, or a PayPal account. You pay tax based on underlying earnings/profit, not bank transactions.

    “2. Over 75% of our stock is purchased from salvage merchants, scrap dealers, eBay sellers or people from their homes. This is making it very difficult for us to obtain receipts, what’s your suggestions on this?”

    Your main options are:
    1. Insist on a receipt. You are the customer.
    2. Pay using a method that leaves a trail, rather than cash. For example, cheque, or PayPal.
    3. Keep your own record of as many details about the transaction as you can.

    31 May 2014

  63. Dan

    I work full time and pay 40% tax on my earnings. I’ve also recently started buying goods and selling on ebay for a profit and looking at around £5k profit for the year. I can see that I need to declare the extra income with HMRC from the article but the questions are:

    - is the calculation sales - stock and expenses = profit (which is the taxable amount).

    - I pay import duty and VAT on import on the goods so can this be deducted from the total sales.

    - will I be paying 40% of the profit as this seems a huge amount

    - is there anything else I can (or is commonly) deducted e.g. internet access

    Thanks in advance.

    15 June 2014

  64. Admin

    “- is the calculation sales - stock and expenses = profit (which is the taxable amount).”

    Basically, yes. See the heading “How much will the tax be?” above.

    “- I pay import duty and VAT on import on the goods so can this be deducted from the total sales.”

    Yes.

    “- will I be paying 40% of the profit as this seems a huge amount”

    Yes. You appear to be a 40% taxpayer.

    “- is there anything else I can (or is commonly) deducted e.g. internet access”

    You can claim anything which is incurred for business purposes. Obviously everyone’s business is different so I cannot give a complete list here. You can claim a business % of your internet access, but not all of it.

    16 June 2014

  65. Ken

    I have become interesting in model steam engines and bought about 10 from savings that needed renovation and repairs, which I have done. I want some other rare steam engines but cannot afford to buy/bid for them unless I sell a few of my duplicate reconditions engines.

    I have difficulty in calling it a business as any engines sold will only be used to buy other engines which will be kept. I envisage buying 3 or 4 cheap engines at a time (£200ish), renovating them and selling them for (£450ish), the generated profit to be then used to buy an engine for my collection.

    I work full time and pay tax and NI. Will I have to pay tax on the £250 profit. I know we are not taking a massive amount of money here, but I would not want to face a bill in five years time for back income tax.

    19 June 2014

  66. Admin

    “I have difficulty in calling it a business as any engines sold will only be used to buy other engines which will be kept. I envisage buying 3 or 4 cheap engines at a time (£200ish), renovating them and selling them for (£450ish), the generated profit to be then used to buy an engine for my collection.”

    What you do with the sales proceeds is irrelevant. You appear to have a recurring plan to buy an item, add value to it, then sell it for a profit. This looks like a taxable business.

    20 June 2014

  67. Les Allen

    I intend to start a sole trader company selling used cameras, flashguns and cameras converted for infrared use. With a view to starting up I have been buying faulty cameras and flashguns from Ebay and other sources and repairing and converting them, building up a stock ready for when I start the business. Stupidly I hadn’t realised the possible tax implications of this. I need to somehow put the (currently personally owned) stock I hold into my new business. How do I go about this?

    1 July 2014

  68. Admin

    As a sole trader, there is no formal distinction between you and your business, so there is no question of transferring ownership of the items. You simply keep a record of their purchase cost.

    2 July 2014

  69. Neeli

    Thank you for such helpful Blog

    I also need some help. I am a mum of 2 and currently not working, but my husband is in full time employment.

    About a year ago we thought of selling some clothing on Ebay. I mostly bring them from Germany as my father owns a wholesale shop and I get the spare items which are left over or not selling or are from previous year. I started it to just use the spare time I had at home. At first only some items were sold with no profit at all, but now I have started making a profit of about 200£ a month and a friend of us told us to register with HMRC regardless of the fact that i am making any profit or not.

    My problem is, as it was not intended to be long term, I have not kept any records of any sales and expenses. What should I do now? I literally have nothing to show to anyone. What should I do now? How should I apply for a tax return? What should I do when registering with HMRC?

    Any help is much appreciated, thanks

    7 July 2014

  70. Admin

    This isn’t really the place for detailed individual advice when you are both late and without records. I would recommend making an appointment with either a local accountant or HMRC, to discuss in detail and in person.

    8 July 2014

  71. Johnathan

    Hi, I am really liking this blog. just a quick question. I have been selling on ebay for 11 months and have not registered with HMRC or anything associated with tax. Total sales are under 9440 pound. I wish to stop selling.

    Because I haven’t registered, now do I need to do anything?

    Thanks

    15 July 2014

  72. Admin

    If as as a result of this paragraph…

    “Having established that the eBay income does in fact come from a business and is therefore potentially taxable, you need to decide whether to register the business with the tax office. This is a legal requirement if there is tax or National Insurance to pay for the year, and it is HMRC’s preference that all new businesses register with them, regardless of size.”

    …you should have registered for tax, then you need to register now, backdated to when your business started. It does not matter that you have now stopped; you still have some income to account for.

    15 July 2014

  73. Ian

    Great Blog, I was made redundant 3 years ago and live on a pension below my personal allowance and my savings. I have been interested in buying and selling items through EBay and understand it could be interpreted as a business. If my sales through EBay were still below the total amount of my pension and savings would I have to register with HMRC even though from my understanding I would not be liable for tax?

    Any advice would be very much appreciated.

    18 July 2014

  74. Admin

    “If my sales through EBay were still below the total amount of my pension and savings would I have to register with HMRC”

    That is not the test. You add all your sources of income together, and if that exceeds your personal allowances (and so results in a tax liability), you must register. If not, it is still HMRC’s preference that all new businesses register with them, regardless of size. You might also need to register for class 2 national insurance if your business exceeds the threshold for that of £5,885.

    20 July 2014

  75. Ali

    Hi,

    I’d be grateful if you could give me some advice.

    My sales on eBay are a mixture of items from our and other family member’s homes, while other items where purchased from local car boot sales and flea markets for resale. In total I usually make a personal profit of £200 - £300 per month. This amount is after discounts for Paypal’s and eBay’s fees but not petrol, internet, packaging etc. I don’t count the original purchase cost, if any (some are heirlooms) of personal items.

    Please can you tell me how I would go about differentiating between personal items, items sold on behalf of others and purchased items on a tax return and should there be any value attributed to personal items subtracted from the profit? Also, as all items are old/retro, it would be difficult, if not impossible, to give proof which category an item fell into if required by the HRMC. I’d doubt they’d just take my word for it. How can I go about doing this?

    Many thanks for your time,

    Ali

    23 September 2014

  76. Admin

    “Also, as all items are old/retro, it would be difficult, if not impossible, to give proof which category an item fell into if required by the HRMC.”

    The tax treatment is not determined by the age or type of item. It is mainly determined by the motivation for acquiring and selling the item.

    When you sell an item, if you remember that it is a personal item, or given to you by family, then do not include in your final accounts on which you pay tax. Only keep a record of it so you can justify why that sale on your eBay account is not included in your taxable figures. Anything that is not a personal item or given to you by family, include it in full in your records and pay tax on it.

    23 September 2014

  77. Glenn

    Hi I wonder if you can help. I earn £18200 before tax per year but have recently started doing electronic/PC board repairs in my spare time. I was thinking of offering this as a send/return service on ebay which i believe could earn between £100 & £400 per month with payment received via paypal or cash. would I have to register this as a business and pay tax on this?

    9 October 2014

  78. Admin

    Yes, of course you would. Why would you think otherwise?

    9 October 2014

  79. lila

    hi
    I earn 24k a year but trading on ebay 3k profit in year .
    Do i still need to pay extra tax on that 3k??I pay tax on 24k through work .thanks

    9 October 2014

  80. Admin

    Of course you do. Did you not read the previous comment? After one detailed article and numerous similar comments, how are people still confused about this?

    9 October 2014

  81. Kath

    Hello

    Great Blog thanks.
    I took early retirement and have a private pension of £10,300. I pay tax on the amount above the personal allowance.

    I want to open an eBay account to sell my hand knitted items. I understand I will need to inform the tax office. My question is will i pay NI? My profit will be in the hundreds rather than thousands. Is my private pension classed as earnings which i need to add to my profits or will my ebay business be my only profit? I’m 6 years from reaching state pension age. Thank you.

    13 October 2014

  82. Admin

    “My question is will i pay NI? My profit will be in the hundreds rather than thousands.”

    No, you will not need to pay NI if your business income is that low.

    “Is my private pension classed as earnings which i need to add to my profits or will my ebay business be my only profit?”

    Your pension counts as taxable income.

    13 October 2014

  83. Adam

    Hi,

    1. I have been buying and selling video games and consoles for 3 months now, making about £250-£300 profit per month. I have not yet registered with HMRC. I am getting most of my stock from eBay (about 75%), the rest is from collecting the items in person, paying cash on collection. Any advice on how to document the stock that are not from eBay? Would HMRC accept an Excel document with a breakdown of the total cost of the bundle with the items within the bundle priced individually?

    2. I have got a part-time summer job from May until October that I am paying tax on. Would the profit I make from eBay fall into my personal allowance limit?

    Thank you, I am loving this forum.

    25 October 2014

  84. Admin

    I feel like these questions have mostly been answered already, but anyway…

    1. Without an invoice, it is uncertain whether or not HMRC will accept the expense. Obviously every business is different, so it comes down to their judgment rather than any clear rules. They will consider how likely it is that an expense has been incurred for business purposes, taking everything into account. So, you should get some sort of receipt if you can. If you really cannot get one, your expense is most likely to be accepted if you pay by a method other than cash, and record as many details as you can: date, name and address of seller, breakdown of purchase, and the cost and sales details of each item.

    2. At the end of the year, all your sources of taxable income are added together, and you pay tax on the total if it is over the personal allowance for that year. There are no allowances or registration exemptions specific to self-employment, and there is no small earnings allowance or exemption for eBay below which all tax obligations can be ignored. It does not matter if tax was taken from your wages during the year, but you do get credit for any such deductions when the calculation is done at the end of the year.

    25 October 2014

  85. Adam

    So if my profit is £250 per month (£3000 a year) that falls under the £10.000 personal allowance. How much tax would I need to pay then? I am new to this and how I see this now is if I register with HMRC, I would then need to keep the records of my selling, and then send the records to them 2 times per year. I have just turned 18 so don’t go hard on me please. Thank you

    25 October 2014

  86. Admin

    “How much tax would I need to pay then?”
    That would depend on how much you were earning from your part-time job, and how much tax you were paying on it. You might find this page helpful: http://www.brighton-accountants.com/blog/tax-self-employment-still-employed/

    “I am new to this and how I see this now is if I register with HMRC, I would then need to keep the records of my selling, and then send the records to them 2 times per year.”

    No, your accounts and tax return are only filed once a year.

    25 October 2014

  87. John

    Hello, I will start a business as self employed selling on ebay. My question is, I will buy ALL the items in outlets and department stores, then ¿are enough the receipts for this purchase to justify all my purchases (to prove the purchases) or it is not allowed and I can only buy items for sell in wholesalers? Thanks in advance, and greetings.

    1 November 2014

  88. Admin

    Yes, buying from retail outlets is perfectly valid. The type of shop doesn’t matter. What is important is that you get a receipt.

    1 November 2014

  89. John

    Ok, many many thanks!! A last question (sorry for so many questions!! hehe), you know if it is valid also the receipts of online purchases made in other European countries (The amounts in this case will be in Euros bills logically)? I ask this because I will bought mainly here but some products maybe be purchased in online stores of toys in France and other countries.

    1 November 2014

  90. Admin

    European purchases are just as valid as UK ones.

    1 November 2014

  91. Steve

    Hi.

    Excuse my ignorance, I am a rookie to this business and tax malarkey.

    If I sell an item on eBay, do I have to pay income tax on my postage costs.

    eg I sell an Item for £10.00 (Inc P&P),the item cost me £2.00 to buy, eBay fees are £1.00, PayPal fees are £0.55 and postage costs are £2.00. Do I have to pay tax on £6.45 or is the postage cost an allowable expense hence I pay tax on £4.45.

    Kind Regards

    Steve

    PS Excellent and useful blog by the way

    3 November 2014

  92. Admin

    The postage cost is an allowable expense, hence you pay tax on £4.45.

    3 November 2014

  93. Sarah

    Hello

    I am starting a partnership with my sister. We only submit one tax form for the business and then each have our own self assessment income tax to do. Is there anything else we will need to submit, individually or as a business?

    Also I am thinking of selling some electronics on eBay as a side thing, so how does this work in terms of filling out self assessment form?

    For example, I buy a camera for £320 and I sell on eBay for £400. Total profit after deducting expenses (postage fees PayPal and eBay fees) is £20. Then does the turnover have to be recorded on the form? (=400?)

    And would that mean that I pay tax on the 400? Or £20 profit?

    Thank you

    9 November 2014

  94. Admin

    “Is there anything else we will need to submit, individually or as a business?”

    Not, not unless you have employees, or are registered for VAT.

    “Also I am thinking of selling some electronics on eBay as a side thing, so how does this work in terms of filling out self assessment form?”

    Assuming this is a separate business from your partnership with your sister, you enter this as a separate self-employment on your tax return. You do not need to register this with HMRC as a business if you have already told them about your partnership business.

    “Then does the turnover have to be recorded on the form? (=400?)”

    You declare your turnover, yes.

    “And would that mean that I pay tax on the 400? Or £20 profit?”

    Only on the £20 profit. The tax return will have boxes to deduct your expenses from your turnover.

    9 November 2014

  95. IT

    Hi,

    Great blog with some great answers, however I do have a question.

    I have recently been made unemployed, which has given me the time to clear a lot of items I have accumulated over the years when I was younger (retro games, graphic novels, action figures etc).

    It’s probably going to take me a few months to get through them all, but I’ll unlikely sell anything else once it is all gone.

    Although I don’t have receipts for the minority of these items (some I bought myself, some through eBay) a rough guess would be at best I break even due to the depreciation and appreciation of all the items combined.

    After doing some research, it would help me minimise costs by registering as a business seller on eBay due to the benefits of reduced listing fees etc (margins).

    Despite registering as a ‘business’ on eBay, I cannot see myself as falling into the definition of a business for HMRC purposes.

    Do I automatically need to register a business to HMRC if I do so on eBay, keeping in mind I cannot account for the value of my items, nor do I realistically expect to make a profit/living from this?

    Many thanks in advance.

    11 November 2014

  96. Admin

    Neither your lack of records, nor the label which eBay applies to your account, are relevant. What is relevant is that you do not appear to have organised a recurring activity with a profit motive, but you are instead selling off personal items. As such, there is no business, and no requirement to register with HMRC.

    12 November 2014

  97. Kevin

    Hi Great Blog

    I am in full time employment and earn approx £30,000 Per Year.

    I have been buying and selling key rings, fridge magnets etc with my own pictures which I take with my own camera for about 5 years now from my bedroom computer.

    I pay 20% of each sale to charity and I sell the items at £1 plus £1.75, postage and packing (the actual postage is 93p but then I have to pay for envelopes etc).

    All monies go into PayPal or a separate bank account which I set up to hold any monies for stock and inks and paper, envelopes etc. I don’t make any profit as all sales go back in to buying more stock.

    My question (as this is just a hobby of mine to keep me out of the pub lol) is do I have to declare it as a business even though I don’t make anything out of it. I just do it to make money to give to charity as it pays for itself so to speak.

    I hope I haven’t been too confusing, it’s just that some people I have spoken with said that the tax man will come calling soon even though I don’t make any income out of it

    Regards Kevin

    13 November 2014

  98. Admin

    You have given a variety of reasons there for not declaring your business, but none of them really stack up.

    As described in the article under the heading “How much will the tax be?”, leaving your money in a business bank account or a PayPal account does not stop it being taxable.

    Labelling it as just a hobby is not an easy escape route if there is a profit motive.

    There is some measure of tax relief on charity donations, but it needs to be under Gift Aid, or taken from your salary, or be in the form of property or listed shares. Your own informal arrangement does not qualify.

    I appreciate that the amounts involved are probably very small, and that you are acting with the best intentions, but I think you have to accept that you are actually making a taxable profit, and declare it accordingly.

    13 November 2014

  99. Stuart

    Hi,

    Just have a query on selling personal items on eBay.

    I have a large personal record collection that has built up over the last 30 years (3,000 records).

    I am now slowly selling it on eBay, one record per. Average value per record is £20 (some more and some less) so if I sell all of them this could add up to £60k.

    I may just break even or may make some profit after deducting what I paid for them but it will be a lot of sales so do I need to inform HMRC and will I be liable for any tax?

    I cannot remember exactly much I paid for each one and don’t have receipts after so many years.

    Many thanks in advance.

    18 November 2014

  100. Admin

    There are 2 potential taxes that you might come within the scope of:

    1. Income tax on a business.

      As you do not appear to have organised a recurring activity with a profit motive, but you are instead selling off unwanted personal items, this is not applicable. The relatively large value of the total sales is not relevant.

    2. Capital gains tax on any gains.

      Tangible, moveable items like your records are formally called chattels. Normally, sales of individual chattels are exempt if they are sold for less than £6,000 each. However, if a group of individual chattels are essentially similar and complementary to each other, and they are worth more together than separately, then they might be treated as a “set”. Examples might be a set of 32 chess pieces, or a collection of records by the same artist. In this case, if the set were sold to a single buyer or connected buyers, the £6,000 exemption would not be available. It is possible that your record collection contains one or more smaller sets; it is not a case of all-or-nothing. Given that you are auctioning your records individually on eBay, this probably does not apply to you, but you ought to be aware of it.

    If neither (1) nor (2) apply, there is no need to inform HMRC.

    19 November 2014

  101. Stuart

    Hi,

    Really appreciate your reply and the advice / explanation. As I am not selling any sets or multiple items in an auction then sounds like all will be tax exempt.

    There may be some that are worth a few hundred each but definitely no records worth anything more than that.

    Just to clarify, the £6000 limit is per item and not a yearly allowance or something similar. e.g. If I was to sell all my records at £20 each then they wouldn’t be taxed, even though it could add up to tens of thousands in total.

    Thanks again.
    Stuart

    19 November 2014

  102. Admin

    The £6,000 exemption is for each item. It doesn’t matter how many of them you sell in a year.

    19 November 2014

  103. gordon

    Hi

    Great site - you really appear to know what you are talking about. I have read a few of the blogs but I cannot find one that covers my situation.

    I am a collector who became a full-time dealer. I am in my 60s and as a result I am starting to sell off my collection as well as still selling as a business dealer on eBay. A large part of my collection was accumulated over the 20 years before I started dealing, then over the next 25 years I added to my collection as I was still a collector and I treated it as a type of pension pot.

    I know this is a grey area when the items involved are all very similar and I understand the £6000.00 per item capital gains tax position but I am still very concerned. I want to do the right thing but I think it would be so wrong if I had to put all my personal collection into stock to sell it and pay income tax on the resultant profit. It does seem very wrong that a person is treated in a different way if they just happen to sell as a full-time dealer and have their own personal collection, a large part of which was bought over 30 years ago.

    Can you give any advice/guidance on my situation?

    Many thanks in advance

    23 November 2014

  104. Admin

    There is no problem with the principle that you are not taxed on items bought for personal use, even if you are running a similar business as well. The issue is more of a practical one. HMRC are rightly going to be highly sceptical of a dealer who says that he bought similar items for his own personal use, that he then happened to make a profit on. Every dealer in the country would be trying it on.

    You do not specify the items in question, which could make a difference. If they were something like antiques, you could reasonably argue that you used a small number of these for personal enjoyment in your own house. If they were something like gold bars, it would be very difficult to argue that they were bought for anything other than to sell for a profit later, especially if you are also a dealer in such items.

    The length of time that you owned the item, and whether or not you were acting as a dealer when the item was acquired, are also relevant.

    Probably your best approach is to keep a record of all your items, and then try to separate them into personal ones and business ones. For the personal ones, you should note some reasons why you consider it to be personal, which might include the nature of the item, the purchase date, and how it was used.

    24 November 2014

  105. gordon

    HI
    i do appreciate your quick detailed reply,the items in question are antiques and comprise silver,badges ,medals etc which i mainly bought prior to becoming a full time dealer in the same type of items.
    I am a mad collector who became a full time dealer in 1989 who carried on collecting as well as dealing.
    The items i collected have never featured in my stock book-i have added to the collection over the years.
    I am 66years old and i feel the time is right to sell a large part of my collection/pension pot. i am concerned about the tax implications. If i sell them through ebay or public auction you could argue( and i will if necessary)that my collection(which is jointly owned with my wife ) are personal possessions and each item falls below the £6000.00 threshold for capital gains tax also they were not bought as part of my business as they have NEVER featured in my stock book.
    Am i being too simplistic? -do you think i will have trouble with HMRC? -WHAT DO YOU THINK IN YOUR EXPERIENCE OF THIS TYPE OF SITUATION HMRC’S ATTITUDE WOULD BE? -it is a tricky one.
    I have very few receipts and a very sketchy inventory relating to the collection
    any further advice you can give would be greatly appreciated
    MANY THANKS IN ADVANCE

    24 November 2014

  106. Admin

    I’m not sure there is much more that I can add to my previous comment. HMRC are obviously going to be a bit suspicious, and rightly so. It is nothing personal; they don’t know you, and people stretch the truth with them all the time.

    I understand that you are probably looking for some sort of reassurance or confirmation of your position, but on a grey area like this, and through a communication channel like this, I can only give general pointers.

    If the amounts involved are significant, and you are still concerned, you should probably arrange an appointment with a local accountant to discuss it in detail with them.

    25 November 2014

  107. J Neil

    Hi, I sell on eBay and Amazon. When submitting a tax return can I add income from ebay and amazon to get one figure and submit that as my annual income to HMRC. Or do I have to submit individual returns for each business.

    25 November 2014

  108. Admin

    It depends on how closely linked the sales through the 2 websites are.

    If you basically just have one product, or a range of general products, that you happen to sell through 2 different websites, you can treat it as one business and add the figures together.

    If each website represents a different type of product, and there is no overlap between them, you have probably got 2 businesses going on. In this case, there is still only one tax return per year, but you enter the 2 businesses separately on it.

    25 November 2014

  109. J Neil

    The inventory is the same across ebay and amazon, all video games. Would this mean business is same and all turnover and expenditure can be combined?

    25 November 2014

  110. Admin

    That sounds like only one business.

    25 November 2014

  111. gordon

    Hi

    Many thanks for your help, you may have gathered I am subject at the moment to an enquiry from HMRC - I will let you know the outcome as it may help other collectors/dealers who happen to find themselves in this invidious position.

    No actual questions have been fired at me yet re my collection but I am expecting some. I do want to do the right thing but not to the detriment of myself.
    I have an accountant but you seem much more au fait with this type of situation.

    You are doing a wonderful job.

    All the best

    25 November 2014

  112. Admin

    It is quite common to ask a specialist firm of accountants to assist with an enquiry, especially if it is contentious. If you are not confident that your accountant can handle it, he should not be too suprised or offended if you suggest bringing in specialist help. Many accountants actually recommend it themselves.

    Good luck with it anyway.

    26 November 2014

  113. john

    hi, thanks in advance, i work in a garage and currently earn approx £26000 a year which i pay tax on, i have ebay sales of around £5000 a year, i get old parts from work that are going in the skip but i make use of them and sell them on ebay. They don’t cost me anything to buy so its 100% profit, minus seller fees, what is my limit before i start getting in trouble with the taxman? also if this is beyond my limit, what is the best route to declare my extra earnings so i can sleep at night, many thanks

    26 November 2014

  114. Admin

    “what is my limit before i start getting in trouble with the taxman?”

    From the article:

    “If your tax-free personal allowance of £9,440 is being fully used by your full-time job, there is no small earnings allowance or exemption for eBay below which all tax obligations can be ignored.”

    “what is the best route to declare my extra earnings”

    From the article:

    “Registering is very straightforward, and can be done online on this page of the HMRC website.”

    27 November 2014

  115. Chris

    Many thanks for this very useful blog. May I add a query to it? (Apologies if it’s been covered in the string above somewhere, but I couldn’t find it when I looked!)

    I’m looking to set up a small, self-employed business by trading on ebay in addition to part-time employment. I will engage an accountant in due course, but my query concerns whether I need to open a business store on ebay and, indeed, change my Paypal account from private to business.

    I’m not expecting to trade hundreds of items per month, so it doesn’t seem worthwhile changing my ebay account from a private seller to a business store (especially as I understand it’s not possible to revert back, if needs be). My Paypal account would also be used for several purchases outside of my self-employment.

    As long as I keep records of what transactions relate to my self-employment, would it be a problem if I maintained my ‘private’ status on both ebay and Paypal rather than changing it to ‘business’?

    Any help will be very much appreciated. Kind regards.

    27 November 2014

  116. Admin

    There is no problem with continuing to use your existing accounts. HMRC do not care what sort of arrangement you have with eBay or PayPal, as long as the profit is reported accurately at the end of the year.

    27 November 2014

  117. lucy

    Hi,
    I work almost full time and I’m over the usual tax thresholds etc. I have looked into starting a small business on ebay, which i expect might earn around £100 profit per month. I am fully aware of the requirements to register etc as your blog is very informative and helpful. The only question I have, which I appreciate you may not be able to answer, is how will this affect my credits for having two children. I really would like to pay my own way and receive less credits, but i’m concerned it may be worked out on some sort of scale and i could actually be much worse off for trying to pay my own way. I hope this makes sense. Sorry If i’m asking in the wrong place, I just don’t seem to be able to find the answer from anybody and I’m scared to take the plunge without knowing the facts.

    Thanks in advance
    Lucy

    9 December 2014

  118. Admin

    Tax credits are worked out using a variety of factors, such as income, partner’s income, hours worked, number of children, childcare costs etc. So, I’m not going to be able to give you a precise answer. The general aim of the system of that you should not be worse off overall by earning more, but it is so complicated, I would not say it was completely impossible for that to happen.

    What you could do is contact them to say that you now have this extra income, and see what effect it has on your tax credits. If they decrease too much, just stop the eBay business and have them reinstated.

    10 December 2014

  119. david

    Hi

    Example: I buy a mixed bag of 10 lamp shades. The lamp shades have all different values but were bought as a job lot on a purchase invoice that totalled £100.00. I then go on to sell 5 of the shades for £200.00.

    Should I work out this profit/tax using the purchase invoice total (£100.00), or should I calculate the average cost of each shade (10.00 each) on the invoice to give me a total of £50.00 against the £200.00 I’ve sold?

    Thanks.

    21 December 2014

  120. Admin

    If you opt to use the cash basis, you should use the purchase invoice total.

    If not, I am not sure that calculating an average cost is appropriate if the items are different, but it would probably be accepted in a trivial case like this (not worth arguing about). Ideally, you would place a value on each lamp shade, such that the total came to £100.00.

    22 December 2014

  121. mrannsville

    I just started selling items in ebay and my profit so far is only less than 150 pounds, am i due still for tax this small amount in january 2015? Do i need to register it for tax my so called online business? I’m employed fulltime and used my personal allowance already. Thanks

    22 December 2014

  122. Admin

    If you are calling your online business “so called” because it is only the occasional selling of unwanted personal items, it is probably outside the scope of tax.

    If you are calling your online business “so called” because of the low profit, that is irrelevant. You will have to register it, and pay tax, but you will not have to file a tax return or pay the tax until January 2016.

    22 December 2014

  123. DanB

    Hello, I run a small repair garage and have been selling old stock which is no longer needed. Some of it is over ten years old. I have no records of what they cost but I would guess most is sold for less than it was purchased for. I have been using my personal eBay account to sell the parts. I make about 30k a year and my company is VAT registered.

    Should I declare this? Do I need to pay vat?

    Thanks Dan

    27 December 2014

  124. Admin

    Is this not just the usual sale of business stock, albeit stock that you have held for some time? Presumably you claimed the purchase as an expense, and reclaimed the VAT, at the time you bought it? I see no reason why you would not have to declare this, and pay VAT on it. Avoiding tax on it just because it is being sold through a “personal eBay account” would be far too easy, and so obviously does not work.

    28 December 2014

  125. DanB

    Thanks for your reply. Yes vat was claimed back on the parts. Some of the parts were given to me. What if the stock was to be put in the bin as it is no longer needed. Could I then take it and sell it, thanks dan

    28 December 2014

  126. Admin

    The stock might be no longer needed, but it clearly still has a value if you are then selling it on eBay. Pretending it has been in and out of some “bin” doesn’t change anything. A good try, but your thinking is way off.

    28 December 2014

  127. Kathryn

    Hi, really helpful blog! Thanks for being so patient answering our questions!

    I work full time, but at weekends I do drawings, paintings etc, which I sell online, and I’m trying to do my first ever tax return.
    I have 3 questions which I don’t think have been covered previously:

    1) A few of the artworks I create are done specifically to benefit a charity - they are described as such, and I donate 100% of the amount paid to the charity (if they sell).
    Is it ok for me to exclude these items from my tax return, as they were never intended to make any profit for myself, and are being sold (with the permission of the charity) to only benefit that organisation?

    2) In fact, the charitable items cause me a loss, as I don’t subtract anything for the cost of the materials, the online processing fees etc., so those extra costs need to be covered by the profits from my other sales.
    Can I claim the materials for the charity items as expenses on my tax return? Although I don’t keep the income from them, they do benefit my online business as the charities then post links to my work on Facebook, Twitter etc., so it’s good advertising.

    3) I understand that postage costs are an allowable expense.
    Do I have to report the total paid by a customer (including an amount for P & P) as income, then subtract the exact costs I incurred sending it?
    E.g. I listed it with P & P costs of £2.40, but actually the postage costs £2.60 and I spent another 50p on a box or bubble-wrap or whatever, so my profit is 70p less?
    OR… is it ok for me to just report the amount paid for the item itself, assume the P & P the customer paid will cover my costs, and if it doesn’t, I just ‘absorb’ the shortfall myself? I’m not trying to avoid paying tax - the P & P paid by the customer is never MORE than the actual costs.
    I’m just trying to make the calculations simpler, as it will take so long to record costs of packaging, postage stamps etc for every item (and I earn enough in my day job to not worry too much about making big profits from my artwork).

    28 December 2014

  128. Admin
    1. What you are arguing is that you are donating your time to the charity, using that time to create artwork for them, and then selling that artwork on their behalf (as their agent). You would need to get the paperwork and details right to support this, the nuances of which are beyond this page. You might be able to convince HMRC that this is what is really going on, but it looks a bit awkward to me.

      Another way to handle it would be to include all such sales on your tax return, and then donate the sales proceeds to the charity as a separate payment, probably under the Gift Aid scheme. In this way, it is tax-neutral.
    2. Yes, that is fine, as long as you are getting a reasonable return for your costs.
    3. You do not have to record the postage cost individually for every item you sell. If you buy a sheet of 200 stamps, it would be sufficient to record that once as your business expense, then make an allowance at the end of the year for any stamps that are still unused. It is also not necessary to split your total sales proceeds between sale price and P+P charged, but presumably your eBay reports do this for you anyway.

    29 December 2014

  129. Peter

    Hello
    Thank you for such a great Blog !
    I read all the answers but still have some questions to rinse.

    I Did started to buying job lots, bundle of used items last year and reselling them individually some of the items on ie. pallet are worth nothing so i dispose them in recycling center - 20-60%. Some items are worth good or some money, and those go on ebay.
    Now how can I tell individual item value cost wise if i pay per lot ?
    Also there is no proof of that particular items to be part of lot as no such notes are made on sale.
    One of the auctions i use to purchase my items do not issue any invoice just item number and value that’s it…

    On top of that car boot buys that have no proof of purchase price - You already mentioned that this could be done just by me noting purchase price an use that as proof of value, should i do same with other items i buy ? and in regards of job lot on the pallet spread cost over all usable items ?
    Ie. Pallet cost £100 usable items 50 items need to be disposed 30
    My cost per item would be £2 its this acceptable ?

    2 January 2015

  130. Admin

    “Now how can I tell individual item value cost wise if i pay per lot ?”

    You will have to use your judgment to break it down as best you can.

    The lack of a proper invoice has been covered many times already; I don’t think I have anything else to add on that.

    3 January 2015

  131. Admin



    4 January 2015