Here’s what anyone selling online should know
Vinted sellers are being warned about tax rules(Image: Witthaya Prasongsin via Getty Images)
Spring cleaning provides an ideal opportunity to tackle those deep cleaning tasks like scrubbing the oven, tidying the garden, and for many of us, having a good clear-out. As numerous Vinted users will confirm, selling unwanted items is a convenient way to earn some extra cash whilst decluttering simultaneously.
However, matters become more complex when considering the potential tax implications on your earnings. Whilst most people won’t face taxation on their additional income, it’s crucial to understand whether you’re exempt – or risk facing penalties.
Platforms such as Vinted, eBay and Etsy now share sales data with the Government, meaning online sellers could face an unwelcome shock.
The reporting regulations stipulate that online platforms send HMRC data on users who make 30 or more sales annually and those whose gross sales exceed £1,700 — but that doesn’t necessarily mean they have to complete a tax return or pay taxes.
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UK tax professionals have issued warnings to online sellers. Lee Murphy, managing director of The Accountancy Partnership, said: “HMRC uses data provided by the platform, whether this is Etsy, Vinted or even eBay, to match against each individual’s tax records.”
The trading allowance is a tax exemption allowing individuals to earn £1,000 through self-employment without needing to declare these earnings to HMRC. This pertains to money-making ventures like freelancing or letting your property on Airbnb — not decluttering things you already own.
Therefore, in the majority of situations, there’s no requirement to inform HMRC or pay tax on the proceeds if you’re offloading your belongings.
However, should the trading allowance be relevant to you, Murphy warned: “Those who’ve exceeded an annual trading allowance of £1,000, and also fail to declare this, may receive reminder letters to ensure that they get their tax return done. Whilst you may think this is just a scare tactic, ignoring these types of letters may lead to further full tax inquiries and criminal investigations.”
Who pays tax on Vinted earnings?
No tax is due if your annual Vinted earnings fall short of what you originally paid for the items. If you’re selling personal belongings, you’re unlikely to face Income Tax obligations — with one exception.
Martin Lewis’ website, Money Saving Expert, provided further clarification: “In almost all cases, if you just flogged stuff you already had lying around, you don’t need to tell HMRC or pay any tax on this.
“The one exception is if you sold a single item for £6,000 or more, or if you sold all or part of a set of things (eg, a chess set) to a single person for £6,000 or more.”
The Government website provided the following example that will apply to most people doing a spring cleaning: “You’re clearing out your attic and decide to sell your unwanted items using online marketplaces. None of the items you sell are worth more than £6,000.
“It’s unlikely that you’ll need to tell us about this income or pay any tax, no matter how many items you sell.
“If you’re selling personal possessions, you probably do not have to pay Income Tax on these.”
They note that “personal possessions” might include things like:
- Clothing
- Ornaments
- Kitchen equipment
- Table and chairs
- Jewellery
- Computers and phones
So, who is HMRC monitoring?
Murphy clarified who risks being caught out: “If you are selling unwanted personal items and not making repeat trades or dropshipping, then you’re unlikely to face HMRC scrutiny.
“If you do, however, earn over £1,000 from your side hustle each year, or you exceed 30 sales within one year, then you must let HMRC know about this to avoid getting any fines or being under any sort of criminal investigation.”
He advised online sellers to review their records to establish the number of items sold and their total income.
You might even reclaim some money back, he pointed out: “Also keep track of any expenses that’ve gone with the sales; stamps, postage materials and courier payments, as you could get some of this back when the time comes to doing your Self-Assessment tax form.”