Do You Have To Pay Tax On eBay Sales?
If you are wondering whether or not you have to pay tax on sales through eBay, you will find the answer to your question in the blog post below. In addition to this you will also find detailed guidance on how to register yourself for self-assessment if you are an eBay seller, the eligibility criteria for being liable for tax on earnings from sales through eBay, as well as a review of allowable expenses that you may consider as a self-employed seller.
Do You Have To Pay Tax On eBay Sales?
Yes, you have to pay tax on sales generated through eBay if you meet any of the following conditions:
- you are trading for profit on eBay
- your annual income from trading on eBay is more than £1,000
- your sales of personal belongings on eBay are more than £6,000
- you are selling on eBay as a registered self-employed individual, a sole trader or a limited company
The Tax Policy posted on eBay’s website clearly states that all sellers are required to comply with tax laws. This means that being a UK-based eBay seller, you are required to pay tax on your eBay sales according to UK laws.
Therefore, whether you are selling on eBay as a side hustle, a hobby or a full-time trade if you are generating profits through sales in excess of £1,000 per year, you are liable to pay income tax on your earnings. However, the Personal Tax Allowance of £12,570 also applies in this case; which means that the first £12,570 of your trading profits will be tax-free.
Similarly, if you are selling used items from your personal collection and are able to gain a profit of more than £6,000 on each item, this will be considered a capital gain according to UK law. Therefore, the £12,400 tax-free allowance for capital gains will be applied here and you will be required to pay the due amount of CGT applicable to your gains in excess of £12,300.
In addition to this, if your annual earnings through sales on eBay are more than £85,000, you will need to register for VAT as well.
You must keep in mind that eBay’s Tax Policy also states that if and when there is an investigation into a seller’s trading activities by a tax authority, eBay is responsible for declaring their information to the authorities.
This means that if you are an eBay seller based in the UK who is not paying their taxes and the HMRC conducts an investigation into your tax matters, eBay is obliged to share the details of your earnings with HMRC.
How Do You Register for Self-Assessment As An eBay Seller?
If your earnings as an eBay seller are more than £1,000 annually, you can register for self-assessment to file your tax returns by following these steps:
- You can use your Personal Tax Account to register yourself if you are an individual eBay seller.
- You should register by 5th October of the second year of your business by using your Business Tax Account if you are registered as a sole trader.
- You will need a Government Gateway user ID and password to register. If you don’t have one already, you will get the option to create one prior to starting the registration process.
- Once you are registered for self-assessment, you will have to wait to proceed until you receive a Unique Taxpayer’s Reference number from the HMRC.
- Once you receive your UTR number, you can use your Personal Tax Account or your Business Tax Account (whichever) is applicable to login ti to your tax account and proceed with filing your tax returns.
What Are The Allowable Expenses For eBay Sellers Registered For Self-Assessment?
As a registered seller on eBay who pays taxes through self-assessment, you will be able to deduct the following allowable expenses from your earning:
- PayPal fees
- Postage and courier costs
- Packaging costs (boxes, tape, etc.)
- Stationery costs (printer paper, ink, etc.)
- Stock for resale
- Relevant insurance
- The cost of an internet connection
- Fees associated with auction management software (Auctiva for example)
- Telephone costs – both landline and mobile charges for business use
- Cost of advertising
- Offsetting the use of the home as business premises
- Staff wages (if applicable)
- Fees for accountants
- Travel costs for sourcing goods, visiting suppliers etc
- Any bank fees or interest charged against your business account
- eBay seller fees
- eBay Shop subscription fee
The above discussion helps to conclude that if you are an eBay seller who is earning profits over and above a certain threshold, you are liable to pay tax on your earnings. This rule applies both in the case of individual sellers as well as those who are registered as sole trading businesses.