For many of us selling off some used clothes on eBay or Vinted can be a way of freeing up some space in the wardrobe and getting a little bit of extra spending money, but with that cash technically being an extra income, the taxman may come knocking.
As of January last year, the platforms we sell on online can collect more information about how many sales we’ve made and how much extra income we are pocketing. From Etsy to Deliveroo, these platforms are now sharing information to HMRC that could leave you with a large tax bill.
While digital platforms are collecting information on your sales, it’s actually your profits that HMRC are interested in. As many people who sell on Vinted often sell previously new clothes at a loss, they needn’t worry. For example, if you bought a new pair of jeans for £50 and then decided to shift them on for £5, technically you would be making a loss that is not taxable.
However, if you’ve been finding cheap clothes or already second-hand items and selling them for a higher price then you may be in trouble.
Sales information will only passed on to bigger sellers, with HMRC receiving your details if you sold more than 30 items in a year to earn £1,700.
So for those with a successful second business, how much exactly will you get taxed? It all comes down to the trading allowance and understanding how it affects you.
The allowance is a tax exemption which means you can earn up to £1000 working for yourself with no need to declare it to HMRC, whether it’s casual work, a side hustle or selling clothes online for your first £1000 you don’t have to worry.
Once you go over a thousand you’ll then have to complete a self-assessment tax form that will take into account your relevant expenses and leave you with a bill.
An example may be Tom, a teacher, who between April 6, 2023, and April 5, 2024 did some part-time photography and earned £800. He then finds some old clothes and sells them on Vinted, earning an extra £400.
Tom didn’t have any intention of profiting when he bought the clothes and they have lossed value since he bought them so the £400 isn’t counted towards his £1000 trading allowance,
This means the earning taken into account are the initial £800 which is below the threshhold and he doesn’t need to file a self-assessment tax return.
