When does eBay selling become taxable?

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Selling any unwanted possessions on auction websites like eBay can be a good way to make a bit of money.

Yet if you become a little too successful or too regular a seller, HM Revenue & Customs may come knocking, looking for some tax.

Here, small business expert George Derbyshire explores when being an eBay enthusiast crosses over into a taxable business operation.


John Pemberton, UK

Suppose that one is a hobbyist collector of certain items, has an eye for a bargain, and starts to sell on these items via eBay.

At what stage would this be judged a business operation that must be registered and tax liabilities paid?

I suppose I am asking: when does a dabbler become someone the authorities would be interested in?


George Derbyshire, chief executive of the National Federation of Enterprise Agencies

Selling on eBay, just like at a car boot sale or via classified advertising columns, can be no different from any other business operation.

In simple terms, it is a business operation when it becomes a profit-making enterprise.

It is a grey area, but there is a difference between selling occasional personal items on eBay and selling for profit.

I would imagine the sort of considerations HM Revenue & Customs would take into account are the size of your turnover, the extent to which you are both buying and selling, and whether you are clearly specialising in one particular commodity as opposed of disposing of unwanted presents or clearing the loft.

I would always encourage people to take a cautious approach and discuss their position with HMRC via its helpline on 08454 915 4515.

It's far better than having to deal with an investigation a few years down the line.

When it comes to completing your tax return, there is a section which is headed "other income", and it is here where you will enter the net earnings from the web business.

"Net" here means your additional income, less all expenses associated with it.

You should keep a careful record of your costs, including the time you devote to the new activity, which should be reflected in your charge to customers.

Keep all receipts of any expenditure and, if appropriate, copies of telephone bills where you can identify calls made on behalf of the web business.

If you use your car to visit customers, again record the mileage which you can charge against the business at a maximum of 40p per mile.

At the same time, you need to record all your income from the new business.

You may wish to think about employing an accountant if you do not feel confident or perhaps do not have the time to do this yourself.

An accountant will also help in making sure that your tax return is accurate and that you are taking advantage of all allowances that may be available.

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