If you regularly sell goods or services through an online marketplace, you could be classed as a ‘trader’.
Currently, HMRC allows you to generate £1,000 in sales (before deducting expenses), tax-free, through your trading. Once you exceed this amount you will be liable to pay Income Tax and will need to register for Self-Assessment. You need to register by October 5th in the following tax year.
An online marketplace is any website or mobile phone app that handles and enables the sale of goods and services from individuals and/or businesses to customers, such as Etsy, Gumtree, eBay, Amazon Marketplace etc.
You will pay a minimum of 20% income tax on profits over the personal allowance of £12,570, rising to 40% on earnings over £50,270 and 45% on earnings over £150,000. Once your income exceeds £100,000 your personal allowance is withdrawn progressively, at the rate of £1 for every £2 of income.
Depending on turnover you may also need to become VAT registered.
If you sell goods online to customers who are overseas you should make sure you are aware of those countries’ tax rules.
If you only sell items occasionally, you can check if you need to tell HMRC about this additional income.
If you’ve never declared income through a Self-Assessment tax return, you can register for HMRC Online Services.
Please talk to us if you need any advice in this area.
Disclaimer: The information in this article is provided for general information only and does not constitute legal or professional advice. We cannot accept responsibility or liability for any actions you may take, or not take, based on this information.
