In the spring statement, Lord Chancellor Phillip Hammond brought attention to those who sell on EBay and other online platforms. He believes that many people are selling, and making profits without declaring their income or filling in tax returns. Therefor, he calls for stricter measures for those using online marketplaces to sell their unwanted items, along with more focus on those who sell as a trade, rather than simply finding a home for unwanted goods.
PayPal already has restrictions that don’t seem to be in line with the current taxation system in the UK. If a seller earns more than £2000 through PayPal in a given year, extra checks will be carried out to verify the business ownership and the identity of the seller. It’s unclear whether PayPal then passes on this information to the HMRC.
In the UK, a person is allowed to earn £1000 per year through the sale of unwanted goods at car boot sales, through EBay, Amazon, Gumtree, Preloved and others. Any earnings above £1000 must be declared in a tax return but this can become confusing for some who have always relied on the employer to deal with the HMRC.
If a person is self-employed, they are allowed to earn £11,000 before tax. This does not mean a person can set up an EBay account and sell £11,000 worth of stock before informing the HMRC as earnings under that amount must be declared annually, even if it’s a loss.
If you are selling regularly and have a full-time job you may be charged at your usual tax code rate. However, it makes sense to keep a record and to work out your actual earnings. Not every penny you earn from selling online will be profit, and as the current taxation laws stand, you are only taxed on profit, income and earnings. You will need to work out how much you spent on the item you’re selling. If you’re looking to make a business over buying and selling on the web, you will need an accountant, to ensure you’re not paying too much tax on tools, uniforms, any travel or other everyday business expenses.
It may seem scary to declare everything, as those new to this will expect a big tax bill, however, with the right book keeping and accountant, you can rest easy knowing you’re abiding by the law, and you’re paying the right amount of tax, not a penny more. The amount may actually surprise you.
If you are selling online right now and creating a regular income, it’s worth documenting your sales and keeping track of your financials for when any new laws and checks come into place. It’s always better to be prepared. It’s doubtful that Phillip Hammond wants to punish those making a little extra pocket money, his aim is, probably, to identify those who are making thousands of pounds regularly without declaring it.
You may even find, through your side gig, that you’re now paying too much tax, and may have the wrong tax code. In that case, try some free consultation from some tax rebate services in order to see if you’re owed tax back.
Remember, if you’re starting a business and have a process of research and development, you can claim R & D Tax Credits. It’s simple and easy and could give you a boost of thousands of pounds.
