A nice little side-hustle

Do you have a nice little sideline selling on eBay, Vinted, Etsy or a similar platform? If you do, technically you are liable for tax on profits, where you are trading with the intent to profit. However, under the trading and property allowances, you’re not liable for tax until you make more than £1,000 of profit a year. This allowance applies to anyone selling goods, services or renting out property.

If you’ve heard about a ‘new’ tax on money made from selling items on any of the popular platforms, you can safely ignore it. There has certainly been a number of alarmist social media posts and even some inaccurate press about this issue.

Yes, there are new rules where the platforms that host online sales by third parties will be subject to new reporting requirements, but it’s not a new tax, just a reporting requirement that affects the platforms, not the sellers.

It goes without saying however that if you have been trading with an intent to profit, have made profits of more than £1,000 on these platforms and have not declared profits up until now, you probably should have been and HMRC are now more likely to spot your income.

The gist of the rules is that online sales platforms are now required to report information on all their registered sellers to HMRC. However, there is an exclusion – of those people who carry out fewer than 30 transactions a year and earn less than the equivalent of 2,000 Euros. That means that, if you’re selling the occasional items of clothing or items that are taking up space in your garage, HMRC won’t even know you’ve made a sale!

Keep records

If you make regular sales or actively sell items you’ve made, you’ll need to add your profits (in excess of £1,000) as part of your personal tax return. That means it’s sensible to keep track of your sales so that you know when you pass the £1,000 milestone.

If you’ve got a serious side-hustle going on it’s a good idea to keep track of all your costs too. That means packing materials, postage, any other costs that need to be offset against your income. For instance, if you’re a crafter and sell what you make, all the costs of materials can be offset against what you earn.

The simplest version of record keeping is probably a spreadsheet, if you set it up properly. However, if you have a thriving side hustle that sells numerous items every month, it might be worth investing a few pounds in accounting software, such as Xero or Quickbooks (there are several other options). This will give you the figures you need when it comes to submitting your tax return and ensures you can provide evidence of your transactions and costs.

If you want to know more about selling online and your tax situation, the HMRC have produced an information sheet that makes it all clear with some useful examples.

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