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Should you pay tax on selling goods online?

8 February 2024

HMRC's new guidance clarifies tax implications for online marketplace users. Understand potential 'trade' classification, tax obligations for traders, a £1,000 allowance, and changes in digital platform reporting.

HMRC has issued new guidance for taxpayers regularly using online marketplaces for selling goods or services. The guidance underscores the potential classification of this activity as a ‘trade’ for UK tax purposes. In such cases, taxpayers might have to pay tax on income derived from trading goods or services through platforms like eBay.

If taxpayers are merely selling unused items from their homes, such as loft or garage contents, they are unlikely to face tax obligations. However, those purchasing goods for resale or creating items with the intent to profit are considered traders and must pay tax on their profits.

A £1,000 tax allowance, known as the Trading and Miscellaneous Income Allowance, covers miscellaneous trading income. If this allowance encompasses all relevant income (pre-expenses), it is tax-free and need not be reported to HMRC.

Since January 1, 2024, digital platforms must collect and report seller information and income to HMRC by January 2025. These changes align with internationally agreed rules mandating digital platforms to report specific information to tax authorities.

For individuals with trading income from online sales who are uncertain about necessary declarations, seeking guidance is advisable. Call us so we can assist you in evaluating your options.

Source: HM Revenue & Customs Tue, 06 Feb 2024 00:00:00 +0100

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