Ebay and income tax

[mjb1961]

New laws which mean platforms like eBay will have to notify HMRC of your earnings from sales comes into force on January 1st 2024,i fear this will have an impact on the amount of preowned items being available, what views do other have on this .

[moawkwrd]

New laws which mean platforms like eBay will have to notify HMRC of your earnings from sales comes into force on January 1st 2024,i fear this will have an impact on the amount of preowned items being available, what views do other have on this .

 

 

There is no new law. It is just a change in how information gets reported to HMRC - you have always been subject to tax if trading on eBay and other platforms.

 

 

Private sellers listing a few locos for sale won't be affected as they're not trading, and I would assume the actual traders are already listed as business sellers and paying tax accordingly.

 

 

This change will only affect people who don't understand the tax rules which have been in place for many decades already and are scared by misleading reporting around the topic, and people who have been selling large amounts of stock acquired through other means and not declaring it as trading income when they should have been doing so anyway.

[Rallymatt]

A lot of people misunderstand tax in UK, there is a distinct difference between ‘income’ and liquidation of personal assets. I started completing tax returns as a 12 year old as I had an income and it was more tax efficient to declare it in my own name, everyone in UK has an income tax account and allowances. When it comes to ‘selling’ if it is done as a source of income (goods purchased for the purpose of resale) that’s classed as a business. If you are moving on some items you no longer want, HMRC is not interested, although large sums could create interest and you might be required to provide proof you are not running a business. As an example, a private individual may sell upto 5 cars a year and that’s not a business, but over that and it is viewed as a business. There are other official bodies that start to take an interest as soon as you are identified running a business, that can have consequences regarding your home (planning permission) insurance and liability, travel (using your car) and insurance consequences there.

Best advice, don’t panic, check the HMRC website for guidance and make sure you are 100% happy with your understanding. You can call HMRC for advice or you can speak to an accountant and never lie to HMRC, they will destroy you.

[Barry-350851]

Though ebay is a fairly poor way of selling. By the time ebay take their 12.8% plus £0.30 out of the total including postage, then the postage and packaging costs and time. Sometimes it isn't worth the bother.

[AndyMac1707817969]

eBay have been supplying HMRC sales information for years. Around January last year a large number of what are referred to as 'nudge letters' went sent out on-mass to many eBay sellers advising them to get their tax affairs in order. It’s really just a case if you are selling a lot (I think HMRC only allow something silly about £1,000 a year for a hobby). After that you have to obtain a UTR number from them and then fill in a self-assessment yearly. Problem really comes in proving the purchase price in order to determine profit if any. Of course if you sell more than about £80K a year you have to be registered for VAT which is just a huge complication if you don’t have VAT invoices for things you might have purchased. If you are liquidating your own assets then you may have to prove you are not making money on said items, it’s up to you to prove this HMRC generally don't take people's word for these things.

 

Of course the idea that these rules are not designed for people like me does not cut much ice with them either. You quickly find the rules apply equally to everyone irrespective of how special a case people think they are.

[Simon-372339]

I'm not an expert but based on various snippets I've read.

Mr A is unemployed but runs a 'business' buying/ selling on ebay. This may mean Mr A needs to register with HMRC as self-employed.

Luckily it's only HMRC that are being informed, they are kittens compared to DWP.

[Simon-369848]

E-bay currently have a promotion every other Friday, sellers get an 80% reduction on seller fees. Not promoting E-bay, just putting it out there. Peace and love.

[Rana Temporia]

With the increase in non-paying time wasters bidding on eBay(from personal experience) it would be fun adding and removing money from the declaration.

[AndyMac1707817969]

How it works is simple, HMRC get sales figures from Ebay, Facebook Marketplace and just about every other major online site where you can sell items. No human is involved, if the figures in their database for you exceed a certain threshold and they have no tax return declaring it then a letter is automatically generated and sent to you basically informing you they have information that shows you have been receiving an income via an online marketplace. It gives you 2 options, option 1 make a declaration that you have not been receiving an income or option 2 give you an opportunity to make a declaration as to how much you think you owe in unpaid tax and make you tax affairs compliant. They are simply giving you enough rope to hang yourself considering they already have the answer.

There is no removing and adding money, tax year ends on the 5 April every year, you then have until 31^st January the following year to submit a self-assessment and pay the tax due. HMRC do a random check on returns and if they significantly disagree as to what they think these might be then they will inform you they are opening a non-compliance case against you and you need to submit the information you used to calculate your return. They can go back 5 years and if they feel you are not giving them full disclosure 20 years. eBay hold records going back to the first thing you ever bought and sold with them, you can request all this through ‘My eBay’, it takes a couple of days, if you can get it HMRC can get it. You end up having to pay the back taxes, interest on the amount owed and a fine for every year each tax return is late. Of course if you are also claiming benefits from DWP and have made a declaration to them that have no income so that is an additional whole new world of trouble.

Unlike other businesses where they can only make an educated guess as to whether you are being honest they really have the answer in front of them , they don’t need to get access to you bank accounts (at this point) through that an come later. Knew someone once who decided it was a good idea to fiddle their electricity. It was a complete success until the meter reading came along and an investigation launched as to why his house used only 10% of the electricity that the average house in the same street used. 

[Rana Temporia]

Just had an email off eBay explaining all this. Basically (according to eBay) if you are a private individual selling your unwanted goods either at a loss or a profit and no item sells for more than £6000 you won’t pay any tax. However, if you are operating as a business then you will. There were some examples in the email where people sold quite a lot but didn’t pay tax. 

[96RAF]

If you go onto your HMRC account you will find listed there all your known income, wages, pensions, etc as well as your saving accounts detail. They already know how far you are along the tax allowance road.

They also tell you if you need to fill in a self assessment form based upon your declared earnings and they provide an on-line tax estimator so you can populate it with actual or estimated earnings in toto and it will tell you how much tax that generates.

[AndyMac1707817969]

Ebay will pass your details to HMRC is you sell more than £1,500 or 30 items annually. HMRC have their own internal criteria as to whether they will investigate someone. They may ask you to provide additional information such as how much you paid for items. It does rely on honesty from the seller and if the amount of money HMRC thinks you are evading tax on whether it makes it worth their while opening a case. If they are not satisfied by your answers then that can result in an investigation. This normally means them going back 5 years, if they are not happy with that they can go back 20 years.

Income is income whether it is earned though a business or as a private individual. If you do owe them money they you can either make a payment or they can deduct that amount from your income tax allowance and you get issues a new PAYE tax code (there is actually an option on a self-assessment tax return to do it this way). Of course you can get another member of your family on a lower income to sell it on your behalf if you don’t want to end up paying 40 / 45% on it.