eBay Sales – Do I Need To Account For Them On My Tax Return?Written on January 18, 2018 by Kirk Rice LLP
I have been selling a few items from home on eBay and someone told me that I will have to pay tax on the money I have received; is that correct?
It depends on the nature of your eBay sales. If all you are doing is selling a few personal items or unwanted gifts that you no longer use or want, then you would not need to declare these to HMRC on your tax return. However, if you are buying items and reselling them on eBay with a view to making a profit then that activity would be classed as a trading business, and you would need to account for your income, expenses and profits to HMRC.
If you already submit a tax return on an annual basis, then you would need to ensure you complete the ‘self-employed’ pages of the tax return with the details of the income and expenses that you incur. The income you include is the gross selling price that an item is sold for. eBay of course deducts their selling fees and will pay you a net figure, but technically you should report the gross figure as income and include eBay’s fees with your expenses. The bottom line profits will be the same of course.
You should think carefully about all the expenses that you incur in running your online eBay sales business. Some will be obvious, such as the eBay seller’s fees, PayPal fees, and the cost to you of the items sold, postage or courier costs, and stationery. Other costs that you may not think of could include motor expenses incurred in taking items to the post office for delivery, mobile telephone expenses, insurance, computers, tablets or printers, use of home as office etc.
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The easiest way to report your online profits is to include all income and expenses for a particular tax year i.e. year to 5 April each year. If you have made a profit then this will be added to all your other personal income (such as an employment salary) to work out how much tax you will need to pay. If you are a basic rate tax payer then this will be at 20%, but if you are a higher rate tax payer then it will be 40%. There will also be national insurance to consider. The tax will be due for payment by 31 January following the end of the tax year. Depending on the level of tax payable you may also be required to make payments on account in January and July.
If you do not currently prepare a tax return, then you will need to register as self-employed with HMRC. It is best to do this as soon as possible after starting your business, but certainly no later than 5 October following the end of the tax year in which you started.
VAT – If your business is very successful and your sales exceed £85,000 in any rolling 12 month period, then you will be required to register and account for VAT on your sales. This may have a very serious impact on your profits and it would be wise to seek professional advice.
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If you would like to discuss the tax implications of your eBay sales, please contact our Tax Partners, Viru Patel on 01344 875 000 in our Ascot office or Hadley Baldock on 0208 789 8588 in our Putney office or email info@kirkrice.co.uk.
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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The FCA does not regulate tax and trust advice.
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