From the casual seller making a little extra money by offloading unwanted items, to the dedicated side hustler turning a moderate profit and long-established businesses, there are people of all backgrounds taking advantage of online marketplaces – from eBay and Etsy to Depop and Vinted. In fact, it’s one of the many drivers of small businesses, with 86% saying that it affords them opportunities. However, to truly make the most of the platform, sellers should be aware of eBay’s tax rules and how they apply to their unique circumstances. After all, if you overlook the guidelines, you may find that you owe HMRC.
In this guide, we’re going to be covering all the frequently asked questions on this topic, from when it’s necessary to inform HMRC about your sales to when and how much tax you might owe. Our aim is to give you all the knowledge you need to feel confident navigating these tax rules and, of course, get on with your side hustle or sporadic sales.
Will I need to pay tax on unwanted items?
Good news – if you’re casually selling a few second-hand items on eBay, it’s unlikely that you’ll need to fork out cash on tax.
Whether you’re reselling some clothing that didn’t fit, giving away electronics like a phone or tablet, furniture and other odds and ends, the golden rule is that if you’re not making enough money to consider it a living (a regular profit), you won’t be on HMRC’s agenda for eBay tax on sales.
This leaves those doing a clear-out or unhauling items they no longer need in the clear. However, it’s crucial to note that there is a limit to the amount you can earn tax-free.
When does eBay tax come into play?
The most important thing to take away from the article is as follows: you are subject to a £1,000 Trading Allowance when you sell on online marketplaces like eBay, meaning that you can earn up to £1,000 per tax year without having to pay National Insurance or Income Tax to HMRC.
Thus, it stands to reason that most casual sellers don’t need to worry. But what if you’re selling more expensive items, or perhaps conducting a large-scale clear-out? Perhaps a relative passed away and you’re responsible for selling on items the family don’t want to hold on to. Here you might not have a business or even intend to turn a large profit, but it’s possible you might exceed the £1,000 Trading Allowance. This makes things murky; if you only slightly pass the £1,000 threshold and are clearly not running a business selling things online, HMRC are unlikely to pull you up on it. However, do note that Capital Gains Tax applies to personal assets (minus cars) sold for more than £6,000, so this covers more expensive items like jewellery or paintings.
This doesn’t mean you can repeatedly get away with a pattern of selling over £1,000 tax-free – rather, it’s better to be careful, particularly if it’s a regular occurrence. If you think this might cover you, consider registering with HMRC or reaching out to an accounting professional to demystify the process.
Can you reduce eBay tax?
As established, if you’re simply selling personal items and don’t exceed the threshold of £1,000 for earnings, then you don’t need to pay tax on those sales.
However, if you belong to the group exceeding this amount, you will be obliged to pay up. Unfortunately, there are no legitimate ways to dodge the VAT charges taxed on these sold items. Therefore, it’s crucial that you stay within your legal allowances without deliberately underreporting your income.
If HMRC classifies you as trader – which includes buying items in bulk and reselling them at marked-up price – you will be expected to declare your earnings and could face fines if you end up being investigated.
This said, you can reclaim VAT on refunded items, and there are some deductible expenses allowed for self-employed people, such as:
- PayPal fees
- Postage and courier costs
- Packaging costs (boxes, tape, etc.)
- Stationery costs (printer paper, ink, etc.)
- eBay seller fees, including insertion fees & final value fee
- eBay Shop subscription fee
Will eBay report me to HMRC?
As you may have heard, as of January 2025, eBay has been cooperating with HMRC, reporting individuals’ information under new data-sharing rules. Typically, this sharing of information occurs when sellers hit a certain number of transactions per year.
Brought in following the DAC7 regulation, which was introduced by the EU and adopted in the UK, these measures are designed to reduce tax avoidance. Another crucial thing to note is that HMRC are also increasing its reliance on tactics such as “nudge letters” – reminders distributed to encourage people to check whether they need to declare their online income. While this correspondence isn’t meant as an accusation, they’re clear signals of intent akin to saying: “we’re watching you”.
One last point on reporting: while it can feel overwhelming to get up to speed with these things, know that eBay tax rules aren’t changing, but the enforcement. In recent times, tax authorities are taking slightly more effort to clamp down on tax avoidance, and especially on digital platforms like eBay and Vinted.
Staying compliant under eBay’s tax rules
Fortunately, it’s not so difficult to stay complaint and tax-efficient as an eBay seller. For one, there’s nothing to do if you’re making under £1,000 every tax year.
Exceeding that amount? Then it’s time to Register for Self Assessment and declare your income to HMRC, which – music to many seller’s ears – is a fairly straightforward process that you can start by searching on the government website. This entails keeping a record of your expenses, including things like eBay fees, postage costs, packaging costs, and even how much internet you use.
Paying eBay tax on sales
eBay tax is a type of tax placed on consumer purchases, and, in the UK, this relates to Income Tax and possibly VAT.
Income Tax
For those whose side hustle has taken off or their eBay activity constitutes full-time trading, they’ll need to register as self-employed with HMRC. Here, the tax-free personal allowance means that individuals will be taxed on annual gross profit of £12,570+, provided eBay trading is the sole or primary form of income.
VAT
When it comes to VAT, you need to pay if your turnover is above the VAT threshold of £90,000 in a rolling twelve-month period. The standard UK VAT rate is 20%, although reduced rates of 5% and 0% may apply to certain items in certain circumstances.
Capital Gains
Capital Gains Tax is imposed on all personal assets (excluding cars) sold for over £6,000, specifically targeting the profit realised from the sale. In the UK, individual sellers benefit from a tax-free allowance of £12,300 annually. This means that if you exceed these amounts, you need to report and pay CGT to HMRC.
Again, if you’re feeling overwhelmed or simply don’t have the time to tease out the nuances of eBay’s tax rules, it’s high time to speak to an accountant. With a wealth of experience and knowledge to tap into, they’ll help you stay compliant and tax-efficient.
Wrapping Up on eBay Tax Rules for Selling Online
There you have it – everything you need to know ahead of selling online following the introduction of the recent eBay tax rules. While it may feel daunting at first, we can assure you that tax is usually not quite as complicated as it may seem at first glance. In fact, it doesn’t have to be stressful at all, as long as you keep the earlier advice in mind.
In a nutshell, whether you need to involve HMRC or not lies in the distinction between trading and casually selling items. If you fall into the latter camp, with no intention of starting up a business, you probably won’t owe any tax. However, if you fall into the former camp and are earning anything above the £1,000 Trader Allowance Threshold, this is when you should get organised and notify HMRC.
