We’ve all sold things online at some point, whether it was on eBay, Amazon, or another platform. It could be done as a part of a scheme or just to profit from what you already own. In either case, you are required to pay tax on what you sell if your sales volume increases significantly. We took a look at the tax requirements for online sellers.
Not Everything Is Taxed
Let’s start by being crystal clear: as soon as you begin selling goods online, you are not subject to taxation. While it is absolutely acceptable to trade online, HMRC contends that people frequently cross ethical lines. When they generate what is referred to be a “commercial profit,” they violate them. The profit they made from selling on websites like eBay or Amazon in this situation may be subject to tax. You must include this information in your yearly Self Assessment return, according to the taxman.
When filing tax returns for the first time or if you are unfamiliar with the process, declaring additional income to HMRC might be perplexing. However, if you intend to take your online sales seriously, it is a requirement.
Tax Requirements For Online Sellers – Liabilities
The Finance Act of 2016 gave HMRC the right to gather data from online marketplaces on “self-employed” people who are not disclosing their income. Before classifying something as a commerce, the government takes into account a number of elements, including internet sales. They include the desire to sell items for a profit rather than just to make a few cents. Other elements include selling products that you only recently purchased, repeating similar transactions over a short period of time, being unable to demonstrate that sold objects were a “pride of possession” before you listed them, fixed price auctions, and modifying items to improve their value.
Tax Requirements For Online Sellers – The Rules
HMRC does not want to tax those who are only working part-time to save money for emergencies. The government approved a trading allowance in 2017 that allowed retailers to make up to £1,000 in sales without having to pay any taxes. They said that the decision was made to make the tax system simpler. Additionally, to assist the UK in “becoming leaders in the sharing economy.”
Everywhere you sell online is affected, not just eBay. Any additional sales after that £1000 threshold are subject to tax.
Failure To Declare
Simply put, tax avoidance takes the form of failing to declare sales. However, it does not follow that you will be taken to jail! Online tax evasion may result in prison time in the most serious circumstances, but in most cases you will be required to pay back any unpaid taxes. Always possible are additional penalties. HMRC has the right to inspect PayPal data and ask online auction sites for comprehensive information. About 870,000 individuals failed to submit a Self Assessment return in 2016. The vendors were hit with hefty fines as a result, and HMRC anticipates higher fines moving forward.
Although filing taxes sounds difficult, it is not. Just be sure you’ve kept thorough records of everything you’ve bought and sold.
