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A quick guide to the personal tax implications of selling online

The benefits of becoming an online seller have been graphically demonstrated for many during the pandemic lockdown.

Perhaps you have dreams of quitting the rat race and waking up at 10am, working in your pyjamas, taking long weekends whenever you like, and answering to nobody because you are the boss. 

Setting up as an online seller is a great option for people who are already small business owners or those who are looking to get started or earn a little more alongside an existing job.

Unfortunately, like offline businesses, there are taxes you need to pay.

If you are self-employed in any capacity, you’ll need to register with HMRC and complete an annual Self-Assessment Tax Return, and that includes being an online seller.

However, there are times where you might sell online and it’s not as part of your business activity – for example if you’re doing a few one-off sales on sites like eBay to shift possessions you no longer need or want, or to raise emergency funds.

In cases like that, you won’t need to pay tax as a self-employed person, as you are allowed to earn up to £1,000 in online sales before you need to pay tax. 

This doesn’t just apply to eBay, but other selling platforms such as Gumtree, Depop and Etsy. This amount is on top of your regular income tax personal allowance of £12,570 per year.

If you make a considerable gain from selling a product or item online, you may also be required to pay Capital Gains Tax, so it is best to seek advice from an accountant or tax adviser if you intend to set up an online business. 

If you are selling a lot online then it may even be worth setting up a limited company, as this business structure may offer certain tax advantages to you. 

The Finance Act (2016) empowered HMRC to look into those who’re selling online. The aim is to crack down on those who are evading tax through online selling. If HMRC class you as an online seller, you will need to pay income tax on your earnings.

If you would like to know more about the personal tax rules around selling online, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 27 April 2021.