Personal possessions and trading are treated differently
HMRC's guidance on income from online platforms describes personal possessions as items that belong to you for your own use. Its guidance on selling on a digital platform says you are unlikely to pay tax if you sell personal items from your home, such as the contents of a loft or garage.
The same guidance says a person is probably trading if they sell goods they bought to resell or made to sell. That is the description most reselling falls under, which is why the distinction matters more than the platform used or the number of listings.
The guidance is written around the activity itself, so it is worth reading even if reselling is something you only do around a few releases a year.
How HMRC looks at whether something is a trade
There is no single test. HMRC and the courts look at a range of indicators, often called the badges of trade. They are weighed together as a whole picture and no one of them settles the question. They include things like:
- Whether the item was bought with the intention of selling it at a profit.
- How often and how regularly sales happen.
- How long the item was owned before it was sold.
- Whether the quantity is more than a person would buy for their own use.
- Whether anything was done to the item to make it sell for more.
- How the purchase was paid for.
The trading allowance
HMRC's guidance on tax-free allowances on property and trading income describes a tax exemption of up to £1,000 a year for individuals with trading income. That is the figure at the time of writing. The tax year it applies to runs from 6 April to 5 April.
The detail that surprises people is what the figure is measured against. The guidance uses gross income, which it defines as the total amount before any allowances or expenses are taken off. In other words it is compared with sales, not with profit, so someone can be over it while making very little.
The same page says that people with gross trading income over £1,000 must tell HMRC, which is done by registering for Self Assessment. It also says that other expenses cannot be deducted if the allowance is claimed, so it is one or the other. Which of those suits a particular person depends on their own figures, and is a question for an accountant.
The dates HMRC publishes
HMRC's Self Assessment deadlines page says that people who need to complete a tax return for the previous tax year must tell HMRC by 5 October. It gives 31 January as the deadline for online returns and for paying the tax due. The page shows the exact dates for the current year.
How much tax anyone pays depends on their total income from all sources, and the Income Tax and National Insurance rates and thresholds are set each year. This post does not try to work any of that out. The current figures are on gov.uk, and an accountant can apply them to your circumstances.
What online platforms report to HMRC
HMRC's guidance on selling on a digital platform explains that new rules started in the UK on 1 January 2024. Under them, platform operators collect details about their sellers and the income they receive, and report this to HMRC each year.
At the time of writing, the guidance says platforms do not have to report sellers who make fewer than 30 sales of goods in a calendar year and receive less than 2,000 euros (about £1,700) for those sales.
These rules are about information being shared. They describe what platforms send to HMRC, not what any individual seller owes. HMRC's page on income from online platforms is the place to check where you stand.
The records HMRC expects
HMRC's guidance for the self-employed says records must be kept for at least 5 years after the 31 January submission deadline of the relevant tax year.
The records resellers commonly keep are the ones that show what was bought, what was sold and what it cost to do it:
- Purchases: the item, the retailer, the date and the amount, with the receipt or order confirmation.
- Sales: the item, the platform, the date and the amount.
- Selling fees and payment fees.
- Postage and packaging.
- Refunds, returns and cancelled orders.
- Other costs of running things, such as subscriptions and software.
Other rules to be aware of
VAT is separate from Income Tax. Gov.uk's page on registering for VAT says registration is required when total taxable turnover for the last 12 months goes over £90,000, the threshold at the time of writing.
Capital Gains Tax can apply to personal possessions. Gov.uk's page on Capital Gains Tax on personal possessions says you may have to pay it if you make a gain when selling a personal possession for £6,000 or more.
Making Tax Digital for Income Tax is being introduced in stages and changes how some sole traders keep records and report. HMRC's page on who needs to use it and when has the current income levels and start dates.
Where record keeping fits
Whatever your situation turns out to be, keeping clean records of what you bought and sold makes it easier to check the guidance, and easier for an accountant to help you. Our post on what to track as a reseller lists the details worth recording.
Minted members can keep purchases, sales, fees and expenses in one place. Minted is a record-keeping toolkit. It does not calculate tax, file returns or tell you what you owe.