HMRC have been heavily targeting online sellers to make sure they pay tax on eBay, Amazon and Gumtree sales. Over recent years, more and more people are finding that they can earn an income from selling online. Unfortunately, this has led to a rise in the number of people illegally not declaring their income.
Do I Have to Pay Tax On eBay, Amazon and Gumtree Sales?
Whether you need to pay tax on eBay, Amazon and Gumtree sales depends on your motivation.
In essence, motivation means whether you are selling items online on a regular basis with the intention to make money. If this is your motivation then HMRC will view you as a trader who is in business. This means you need to declare your income and pay tax if necessary. Here are some of the questions HMRC to assess your motivation as online sellers:
- Are you selling regularly to make a profit?
- Do you buy stock and hold onto it?
- Do you make items to sell at a profit?
- Are you a registered business on eBay or Amazon etc?
- Do you buy things at wholesale to sell on?
You motivation may be to sell something to free up some wardrobe space, for example. In these cases you would not be considered a trader so don’t need to worry about tax.
How to Pay Tax On eBay, Amazon and Gumtree Sales?
If your motivation is to make money then you must let HMRC know that you are in business. You can do this by registering as self employed on the HMRC website. If you already complete a tax return for another reason, then you need to complete a CWF1 form instead.
You must register as self employed by the 5th October of your business’ second trading year. Failing to do so may mean you’ll face penalties.
You will now need to complete a self assessment tax return each year. This is the form you use to declare and pay tax as an online seller for eBay, Etsy Amazon and Gumtree sales. It is due by the 31 January each year detailing your earnings in the previous tax year. A tax year runs from 6 April to 5 April. Your tax return due by 31 January 2019 will cover your earning from 6 April 2017 to 5 April 2018.
Working Out How Much Tax You Pay as an Online Seller
Once registered as self employed you may need to pay tax. The amount of tax you pay depends on how much you earn and the allowances you are entitled to. Find out how to work out how tax and National Insurance work when you are self employed here.
HMRC £1,000 Trading Allowance
HMRC launched a new tax allowance called the Trading Allowance. This means you may not need to pay tax on eBay, Etsy, Amazon and Gumtree Sales. Under the rules if you make less than £1,000 in sales, you don’t tell HMRC or pay any tax on your income.
Remember the HMRC £1,000 trading allowance refers to sales rather than profit.