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Should you report your online sales to HMRC?

We all have clothes, unwanted gifts and general tatt lying around the house, taking up precious space and worth a few quid.

Selling these items is an easy way to give them a new lease of life whilst giving us a bit of extra cash in the process. Especially after our bank accounts have been milked following the Christmas and New Year celebrations.

But following HMRC’s latest announcement, should you report your online sales to HMRC?

HMRC announcement

It was announced that from January 1st, online selling platforms such as eBay, Airbnb and Amazon (to name a few) must share seller information with HMRC.

HMRC have always had access to these records but previously had to request them if they wanted to investigate your income. The changes now allow for information to be readily available to crack down on potential tax dodgers.

As per most HMRC announcements, this news caused an uproar. Surely, I don’t have to report the income from selling a garish sweater gifted by my Nan?

Well, only earnings above £1,000 must be disclosed on your tax return BUT even then only if there is a pattern of trading, incentivised by making profit.

For example…

Selling your unused laptop for over £1,000 does not need to be declared if this was primarily bought for personal use and the sale was only to clear some space.

But, if you were to buy and sell several laptops in fairly quick succession, perhaps refurbishing/upgrading them to increase sales price, this would indicate a pattern of trading.

Hence if the proceeds of this exceeds £1,000 then this would have to be declared.

Badges of Trade

To further understand if HMRC would deem your sales as reportable income, we refer you to the ‘Badges of Trade’. HMRC will refer to the following 9 criteria to assess whether something is a trade.

CriteriaKey Information for Determining Trading
Profit-seeking motiveWanting to make money supports trading, but it alone doesn’t prove it.
Number of transactionsRegular transactions suggest a trade.
Nature of the assetIs the asset valuable only through sale? Or does it generate income or provide personal enjoyment?
Similar trading transactionsIf your transactions resemble an existing trade, they may be considered trading.
Changes to the assetDid you repair or modify the asset to sell it more easily or for a higher profit?
Manner of saleWas the sale typical of trading organizations, or was it an emergency cash sale?
Source of financeDid you borrow money to buy the asset, and can the funds only be repaid by selling it?
Interval between purchase and saleIf you intend to resell shortly after purchase, it suggests trading.
Method of acquisitionAssets obtained through inheritance or as gifts are less likely to be considered for trade.
HMRC Badges of Trade

Should I report renting out my spare room?

You may have advertised your spare room on Airbnb, but does this now mean you have to report your income?

The government’s rent a room scheme allows you to earn up to £7,500 per year from letting out furnished accommodation in your home, though this is halved if the income is shared. For more information, please click on this link to the HMRC guide.

Though HMRC will have access to the Airbnb sales, if your income has not exceeded the threshold then this also doesn’t need to be reported.

To that end

Though this announcement may help HMRC clamp down on potential tax dodgers, the underlying tax rules haven’t changed.

If you’re not trading, you won’t be taxed. All this announcement does is make clear HMRC will be able to get information from certain websites more easily. If you’re still unsure, please get in touch and we can help clarify this for you.

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