Date posted: 22nd Jan 2024
By tax partner, Lee Watson
There has been quite a lot of debate, over the past couple of weeks, about the accessing of information by HMRC from websites such as eBay, Vinted, Airbnb, Deliveroo, Amazon etc.
There has also been a lot of misunderstanding about what is reportable to HMRC from a tax perspective.
Separating the truth
To put some minds at rest, if you are simply selling unwanted personal items – clothes, furnishings, children’s toys etc. – then there is no tax to pay. You did not buy the items to make a profit and simply selling unwanted personal items will not generate a tax charge.
However, where you have bought the items to make a profit by selling them on, then you are likely to be considered as trading and may be required to pay tax.
What is the £1,000 allowance?
This is known as the trading allowance and exempts trading income of up to £1,000 from income tax and national insurance. A similar allowance exists for those that rent properties.
So, if you sold items (that you originally acquired to sell on) for £900 during a tax year, then you are unlikely to be subject to tax as this is less than £1,000. Each individual’s position does differ though and if you have other income sources, you need to check your own position, as the allowance may not be available or it may not be wise to use it, especially if you have other sources of self employed income.
Even if you are unable to use the £1,000 allowance, you will be able to deduct the cost of acquiring the sold items. So, if you bought items for £700 that you sold for £850, you would only be taxed on the £150 profit made. Again though, if you have your personal allowance entitlement available, there may be no tax to pay, but you will still be required to notify HMRC via a tax return.
Key dates
The UK tax year runs from 6 April to 5 April.
If a tax return for a tax year is filed online, you have until 31 January following the end of the tax year, to complete the tax return and pay any tax due. So, for the current tax year to 5 April 2024, the tax return online filing date will be 31 January 2025.
Who will be impacted?
It is important to remember, that this is not a new tax from HMRC, rather it is a new way of collecting data on taxpayers who have not declared all of their taxable income sources to HMRC.
Those who rent their homes via Airbnb are more likely to have to declare their income. With prices per night rising to hundreds of pounds, it can be very easy to go over the £1,000 “threshold”.
What happens if I do not file a self-assessment return?
If you do not file a tax return when you are required to, then you will receive late filing fines and penalties, which may be more than the income you have made.
In addition, if HMRC believe that you have deliberately not declared the income and paid the tax, there can be tax-geared penalties for non-disclosure which can be quite significant.
What action should I take?
If you have any forms of income that has not been declared to HMRC, regardless of whether this was an innocent mistake or deliberate, it is advisable to make a declaration to HMRC before they find out. This will help lessen any penalties that HMRC may charge.
To get in touch about any concerns you may have regarding extra earnings, contact us here.
