eBay Tax

There’s been a dramatic rise in online searches for eBay tax recently. This is, in part, due to confusion over changes to the platform’s requirement to report to HMRC.

It’s been a hot topic in the press so we wanted to try and shed some light on the subject.

Although the way eBay, and other platforms, report to HMRC has changed, the obligations as far as eBay tax has NOT.

It has always been the case that earnings over £1,000 need to be reported by the eBay seller to HMRC. But now eBay are legally obliged to send all sales details for all sellers to HMRC direct.

So, if you haven’t already registered with HMRC, and earn over £1,000 per year from eBay read on for some useful information about eBay tax.

eBay Tax Basics

As an eBay seller in the UK, your income tax liability is determined by the profit generated from your online sales. Profit is calculated by deducting allowable expenses from your total income. Allowable expenses can include the cost of goods sold, eBay fees, packaging materials, and postage costs.

Trading Allowance Explained

The trading allowance is a tax relief measure designed to simplify the tax obligations for small-scale sellers, including those on eBay. The trading allowance allows individuals to earn up to £1,000 per tax year tax-free from self-employment or casual income, eliminating the need to declare or pay tax on this amount.

For eBay sellers, this means that if your annual income from eBay sales falls within the £1,000 threshold, you may not need to report it to HM Revenue & Customs (HMRC), and no tax will be due. This provision provides a welcomed respite for small-scale sellers who engage in occasional or part-time selling.

However, if your income from eBay is over £1,000 per tax year then you must register with HMRC for Self Assessment and complete and submit an annual Self Assessment tax return.

Opting Out of the Trading Allowance

While the trading allowance offers a simplified approach to tax for many eBay sellers, some may find it more advantageous to opt out. For those with expenses exceeding their income, opting out allows them to declare their full income and claim deductions for all eligible expenses, potentially reducing their tax liability further.

It’s crucial to carefully assess your individual circumstances and consult with a tax professional to determine whether opting out of the trading allowance makes sense for your eBay business.

Record-Keeping and Compliance

Regardless of whether you benefit from the trading allowance, maintaining accurate records of your eBay income and expenses is crucial. This ensures compliance with HMRC regulations and provides a clear overview of your business finances. In the event that your income exceeds the trading allowance or you choose to opt out, having detailed records will simplify the process of reporting and filing your tax return.

What to do about eBay tax

For eBay sellers in the UK, the trading allowance presents a valuable opportunity to streamline the taxation process. While this simplification benefits many, it’s essential to carefully evaluate your situation. Consider whether opting out might lead to more favourable tax outcomes. Staying informed, keeping detailed records, and seeking professional advice when needed is vital. This will empower you to make informed decisions and navigate the complexities of income tax with confidence. Remember, the trading allowance is a tool designed to support small businesses. So make the most of it as you continue to thrive on eBay.

Helping you with your eBay Tax

Or just email us if you want our:

New Business Start-up Checklist, or;
Business Plan Template, or;
Help with
- Bookkeeping
- Software
- Accounts
- Taxes

Achieving Success with your business

If you’re just starting your new business venture or struggling with the steps to the next level contact us now.

We can help you with this and much more

Get ready for success with Moore Financial Management

We can help you with all of your compliance obligations such as:

Self Assessment Tax
Making Tax Digital
Corporation Tax
Filing Accounts
VAT
Payroll and Pensions

But also the things you really need to increase the chances of your business being a success

Management Accounts
Cashflow Reporting & Forecasting
Budgets
Real Time up to the minute information

These are the things that add value and the information you need in order to make the correct business decisions

If you’re not confident with any of this or don’t have the time, getting a licensed accountant to do it for you can actually save you money. It can free up your valuable time which you can use to concentrate on your business. You can also benefit by knowing it has been done correctly and on time.

Mistakes can be costly.

As can missing deadlines.