Selling your old clothes, unwanted gifts and outdated tech on online marketplaces such as eBay and Vinted is nothing new. These platforms have helped turn stuff sitting around into cash for years. They have also helped many individuals run their own little businesses and make profits without attracting HMRC’s attention.
For any self-employed income above the £1,000 trading allowance, an individual needs to complete and submit a self-assessment tax return to HMRC. This encompasses a whole host of things one might consider a “side-hustle” or ways to make extra cash. These include re-selling second-hand clothes, products from crafts and hobbies, freelance work like tutoring and renting out space amongst other things. The tax law has not changed, and it is a requirement of those earning income to declare it to HMRC through self-assessment.
Until now, digital marketplace platforms like eBay, Vinted, Airbnb, Etsy and many others have not been required to provide HMRC with any information regarding individuals sellers’ sales. From the 1st of January 2024, these platforms will be obliged to collect and share details of sellers’ transactions with the tax authorities making income earned more visible to HMRC. This already happens with banks who provide HMRC with interest income earned annually, so it is simply extending this now to the digital marketplace platforms.
By the end of January 2025, firms will have to provide sellers’ tax identification, bank account details and the number and value of transactions IF the seller makes over 30 transactions or over £1,735 a year. The information being shared with the HMRC will also be shared with the seller. This means not every seller will come under the rules, however, given how quickly these transactions can add up, it’s more likely than not that a seller will hit the 30-transaction threshold within a year.
Should you be concerned? Tax law says it’s only those “making a profit” (Income less costs) through “operating a trade” that will be affected. The terminology is open to interpretation but for example on Vinted, we’ve taken that to mean activities like buying second hand-clothes for the explicit purpose of reselling and making a profit. HMRC’s manual on business income goes into various badges or signs of “trade”. If you are simply selling your old clothes that you no longer need this is not a trade.
There’s no real way of getting around this if you are side-hustling over £1,000 per year as a trading activity . There are the following annual tax-free allowances you can use:
- Trading allowance: tax-free income up to £1,000 made from self-employment – note this is the income before commissions have been deducted so not necessarily what you receive.
- Personal allowance: if your total income is below £12,570 then income is covered by your tax free personal allowance (you would still need to submit a tax return but might not have a tax liability).
- Rental allowance: up to £1,000 tax free income from renting out space that is not in your own residence.
- Rent-a-room allowance: up to £7,500 tax free income from renting out a space in your own residence.
Any income above these allowances requires you to register with HMRC and submit a self-assessment to HMRC annually.
In summary, if you’re making a profit from your side-hustling and it meets the conditions of being a trade then you must register as a sole-trader and submit a self-assessment tax return if the income exceeds £1,000. Keep good records of all your income and expenses in case HMRC require you to provide this information.
If though you just use these platforms to sell off your personal possessions and are not providing any services like tutoring then you are less likely to have a problem.