Have you seen the news about the new HMRC tax on selling clothes online? Entrepreneurs across the UK are facing a new “side hustle tax” where anyone who earns over £1,000 in extra income per year becomes liable for taxes — even if you are only £1 over the threshold.
While this ruling will not affect all online sellers, plenty more will need to complete UK tax returns before 2025. Don’t get caught out if you use these websites! Keep reading to see the common FAQs about this new system.
Do You Have To Pay Tax For Selling On Vinted, Depop And eBay?
Users on Vinted, Depop, eBay and other reselling sites may need to pay and declare taxes on earnings of £1,000 or more.
These websites will have to declare the financial details (bank account and transaction history) of sellers who have made over £1,735 or completed over 30 transactions.
However, this is not a significant change from the current tax rules. Right now, any user earning over £1,000 in profits must report their income and pay taxes. The only major change is that from 2025, the websites must report information to the HMRC to stop sellers who don’t declare from slipping through the cracks.
Does This Only Affect Clothing Websites?
No, these new rules don’t only affect clothing transactions. Any products sold online are included in the new regulations. Airbnb and Uber will also need to report their information to the HMRC. So, if you use any of these websites and earn above the £1,000 threshold, you will need to get your records in order.
Why Is The Government Cracking Down On Tax And Reselling?
Though you might not view your hobby as a business, if it earns money, it technically is and needs to pay tax. Of course, this depends on how much you earn on and off the platform.
HMRC is focusing on independent sellers to ensure all income is declared and the tax is properly collected. These new regulations are also influenced by the UK joining the OECD (Organisation for Economic Cooperation and Development).
How Do You Pay Taxes As An Online Seller?
Think you might need to pay the second-hand clothing tax? You are not alone. Thousands of sellers will need to declare their additional income before the financial year ends.
You will need to register as self-employed with HMRC and complete a Self-Assessment tax return for your business. Note that the financial year runs from the 6th of April to the 5th of April — it is not a calendar year.
If you are unsure whether these rules apply to you, it is always best to double-check. Look at your earnings in the last financial year. If they are over £1,000, start the process to avoid penalties or fines.
Tax For Selling On Depop, Vinted, Ebay & More - The Takeaway
Whether you are partial to selling on Vinted or prefer Etsy, you must keep track of your sales and expenses. This will help you understand whether you need to submit a return and it could help you avoid some big penalties.
Want to learn more about your personal finances? Visit the Cash Asap blog now.
