Last updated on January 6th, 2025 at 09:23 am

No Tax Changes for Online Sellers in the UK

Selling unwanted items online has become a popular way for people to declutter their homes and earn some extra cash. From clothing and gadgets to furniture and toys, platforms like eBay, Facebook Marketplace, and Depop have made it easy for anyone to turn their unwanted possessions, hopefully into profit.

Recently, however, concerns have arisen about potential tax obligations for online sellers in the UK. Many worried they might face stricter rules or additional paperwork, especially if selling became a regular activity. Thankfully, HM Revenue and Customs (HMRC) has confirmed that individuals selling personal items they no longer need will not face any new tax burdens.

As with all posts on here about legal and financial matters, this is our understanding and does not constitute legal or financial advice.  Before taking any action in this area, please check with your accountant or other professional adviser.

What the Rules Say for Individuals

HMRC has long maintained that selling items you own personally and no longer use doesn’t generally count as a taxable activity. This applies to second-hand goods such as old books, clothes, or furniture sold for less than you originally paid. The key is that these sales are not part of a business.

However, things change if you buy items specifically to sell for profit or if you’re regularly selling large quantities. In these cases, HMRC may view your activities as a business (see below), meaning you could be liable to pay tax on your earnings.

What This Means for You

For the majority of people selling unwanted items online, there’s no need to worry. If you’re simply clearing out your home, HMRC’s confirmation means no new tax rules will apply to your activity. However, if you’re considering selling items more regularly or turning it into a side hustle, it’s worth keeping track of your earnings and understanding the difference between casual selling and running a business.

Those who sold at least 30 items or earned roughly £1,700 (equivalent to €2,000), or provided a paid-for service, on a website or app in 2024 will be contacted by the digital platform in January to say their sales data and some personal information will be sent to HMRC due to new legal obligations.  This doesn’t automatically mean that you need to fill in a tax return though, as Angela MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive Officer, said in a recent press release :

“We cannot be clearer – if you are not trading and just occasionally sell unwanted items online – there is no tax due.”

Tips for Staying on the Right Side of the Rules

1. Keep records: Even if you’re a casual seller, having a record of your sales can help clarify your situation.
2. Understand the trading allowance: Stay within the £1,000 limit if you want to avoid any possible extra obligations.
3. Know when to declare: If your sales grow, consult HMRC’s guidance to ensure compliance.

Be Prepared to Register for Self Assessment

The HMRC say in their press release linked to about that those who may need to register for Self Assessment and pay tax, include those who:

For now, online selling remains a stress-free way to clear clutter and maybe make a little money. So, keep selling with confidence!

What It Means for Your Business

The digital marketplace has revolutionised the way people buy and sell goods, offering unprecedented opportunities for small businesses and independent sellers. Over the years, one concern has loomed large for online sellers: the potential for disruptive changes to tax regulations. However, recent announcements confirm that there will be no immediate changes to tax obligations for online sellers in the UK. This decision has brought relief to many, but it also raises important questions about the future of online commerce and the responsibilities of sellers in an increasingly digital economy.

Understanding the Current Landscape

Online selling platforms such as eBay, Etsy, Amazon, and others have empowered individuals and small businesses to reach global markets with relative ease. These platforms have facilitated the rise of side hustles, microbusinesses, and creative entrepreneurship. However, as the digital marketplace has grown, so too has the complexity of taxation.

Under current UK tax regulations, online sellers are required to report their earnings and pay taxes just like any other business. If you sell goods online and your turnover exceeds the tax-free personal allowance (currently set at £12,570 for most individuals) or the trading allowance (£1,000), you are legally obligated to report this income to HMRC. This applies whether you’re a hobbyist selling crafts occasionally or a full-time e-commerce entrepreneur.

Why No Tax Changes?

The government’s decision to keep the current tax framework unchanged reflects a desire for stability in a volatile economic climate. Over the past few years, businesses have weathered significant challenges, from Brexit to the COVID-19 pandemic. With rising living costs and inflation adding pressure, introducing new tax burdens on online sellers could have stifled growth and discouraged entrepreneurial activity.

Additionally, the government recognises that online selling has become a vital source of income for many households. Imposing stricter tax requirements or increasing tax rates for small-scale sellers could inadvertently harm those who rely on these platforms for supplementary income. Maintaining the status quo offers a degree of predictability and allows sellers to focus on growing their businesses without the fear of sudden, disruptive regulatory changes.

What This Means for Online Sellers

While no tax changes may seem like a green light for business as usual, it’s essential to understand your current obligations and ensure compliance. Here are some key considerations:

1. Record-Keeping Is Essential Every online seller should maintain accurate records of their sales, expenses, and profits. Whether you’re selling handmade jewellery, vintage clothes, or electronics, keeping detailed records will help you stay on top of your tax obligations and avoid any issues with HMRC.
2. Know Your Allowances The trading allowance of £1,000 means that if your total sales (not profits) are under this amount in a tax year, you don’t need to declare it. However, if you exceed this threshold, even by a small amount, you must report your income and may need to pay tax on the profits.
3. VAT Registration Threshold For larger sellers, it’s important to note that if your turnover exceeds £90,000 in a 12-month period, you must register for VAT. This can involve charging VAT on your sales and submitting regular VAT returns to HMRC.
4. Use Digital Tools The Making Tax Digital (MTD) initiative is transforming how businesses interact with HMRC. While MTD currently applies primarily to VAT-registered businesses, it’s expected to expand to include Income Tax Self-Assessment in the coming years. Familiarising yourself with digital accounting software can help streamline your tax reporting process and ensure compliance.

The Bigger Picture: Challenges and Opportunities

The government’s decision to maintain the current tax framework for online sellers doesn’t mean there aren’t challenges ahead. The rapid growth of e-commerce and the shift towards digital-first businesses have sparked debates about how best to regulate this sector.

One ongoing issue is the competition between small online sellers and large multinational corporations. While small sellers must navigate the complexities of income tax and VAT, some global giants have been criticised for their ability to minimise tax liabilities through complex structures. Ensuring a level playing field is crucial for fostering fair competition and supporting small businesses.

On the other hand, the digital economy also offers immense opportunities. Online selling allows individuals to turn passions into profitable ventures, reach customers worldwide, and build sustainable businesses from their own homes. The lack of new tax changes enables sellers to focus on leveraging these opportunities without the added burden of navigating new regulations.

Tips for Staying Ahead

If you’re an online seller, here are some practical steps to ensure you’re prepared for the future:

• Stay Informed: Tax regulations can change, and it’s essential to stay updated on any announcements that may affect your business. Regularly check HMRC’s website and consider subscribing to updates.
• Seek Professional Advice: If your business is growing or you’re unsure about your tax obligations, consulting an accountant or tax advisor can save you time and stress.
• Invest in Your Business: With no immediate tax changes, now is a great time to reinvest in your business. Whether it’s upgrading your equipment, enhancing your product offerings, or expanding your marketing efforts, focus on growth.
• Build a Community: Engage with other sellers and small business owners through forums, social media, and local events. Sharing experiences and advice can help you navigate challenges and find new opportunities.

Looking Ahead

The government’s decision not to implement tax changes for online sellers provides much-needed stability in a time of economic uncertainty. For many, this is an opportunity to consolidate their businesses and plan for future growth. However, as the digital economy continues to evolve, it’s vital for sellers to remain proactive, informed, and prepared for potential changes down the line.

In the ever-changing world of e-commerce, adaptability is key. By staying compliant with existing regulations and embracing the tools and resources available, online sellers can thrive in today’s dynamic marketplace. The absence of immediate tax changes is a welcome reprieve, but it’s up to individual sellers to ensure they’re equipped to navigate the road ahead.