Despite what people are saying right now, there is no new ‘side hustle’ tax or changes to eBay selling and the taxes upon online sales. Instead, they are effectively tightening up their enforcement of existing rules. So, for online sellers of all kinds – casual sellers offloading unwanted items to businesses exploiting the platform as an additional income stream – it’s really important to get up to speed with your obligations.
This is where this guide comes in: we’ll be covering all of the FAQS that tend to come up, from when you need to inform HMRC of your activity to when and how much tax you might owe from your eBay sales. By the end, you should be able to keep selling with confidence. So grab yourself a cuppa and let’s get started.
Will my eBay sales be taxed?
It’s safe to say that when the last changes to online marketplace taxes there was something of a panic. Not to worry, though, if you’re casually selling a few second-hand items on eBay, you likely won’t have to pay taxes. Whether you’re reselling accessories that no longer fit your style, giving away electronics like phones or tablets, or selling furniture and other miscellaneous items, the key point is that if your earnings aren’t substantial enough to be considered a regular profit, HMRC won’t be concerned with your eBay sales tax.
This means those clearing out their homes or getting rid of items they no longer need are essentially in the clear. However, it’s important to remember that there is a threshold for how much you can earn without paying eBay tax.
When does HMRC come into the picture?
The main takeaway from the article is this: if you sell items on online marketplaces like eBay, you’re entitled to a £1,000 Trading Allowance. This means you can earn up to £1,000 in a tax year without having to pay Income Tax or National Insurance to HMRC.
So, for most casual sellers, it doesn’t need to be on your radar. But what happens if you’re selling higher-value items, or undertaking a big clear-out? Maybe a relative has passed away, and you’re tasked with selling belongings the family no longer wishes to keep. In such cases, you might not be running a business or aiming to make a significant profit, but it’s still possible to exceed the £1,000 allowance.
That’s where things can get a little unclear. If you go slightly over the £1,000 limit and it’s evident you’re not operating as a business, HMRC are unlikely to intervene. However, keep in mind that Capital Gains Tax applies to personal possessions (excluding cars) sold for more than £6,000—here, this could include valuable items like jewellery or artwork.
Of course, it doesn’t mean you can routinely sell over £1,000 worth of goods each tax year without paying tax. So, it’s wise to proceed with caution, especially if selling becomes a regular activity. If this sounds like it might apply to you, it’s worth registering with HMRC or speaking to a trusted accountant for clarity on your situation.
Is there a way to reduce my eBay taxes?
As mentioned earlier, if you’re just selling personal belongings and your earnings stay below the £1,000 threshold per tax year, you won’t need to pay tax on those sales.
However, if you fall into the category of earning above that amount, you’ll be expected to pay up. There aren’t any legitimate ways to avoid VAT on items you’ve sold, so it’s important to stay within the legal limits and avoid underreporting your income.
If HMRC considers you a trader — for example, if you’re buying items in bulk, upcycling them and reselling them at a profit — you’ll need to declare your income properly. Failure to do so could lead to penalties, especially if you’re investigated.
That said, you can claim back VAT on refunded items, and if you’re self-employed, there are certain expenses you may be able to deduct, 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 share my information with HMRC?
As you may know, from January 2025 onwards, eBay has been working with HMRC to share sellers’ information under new data-sharing rules. This typically happens when sellers hit a certain number of transactions in a year.
These measures were introduced as part of the DAC7 regulation, which was put in place by the EU and adopted in the UK. The aim is to tackle tax avoidance. Another important point is that HMRC is increasingly using tactics like “nudge letters” — reminders to encourage people to check whether they need to declare their online income. While these letters aren’t accusations, they send a clear message: “We’re keeping an eye on you.”
Finally, it’s worth noting that while eBay’s tax rules aren’t changing, enforcement is tightening. Recently, tax authorities have been stepping up their efforts to crack down on tax avoidance, particularly on digital platforms like eBay and Vinted.
Staying compliant with eBay’s tax rules
Luckily, it’s not difficult to stay compliant and tax-efficient as an eBay seller. If you’re making under £1,000 per tax year, there’s nothing you need to do.
If you go over that amount, though, it’s time to register for Self Assessment and declare your income to HMRC. The good news? It’s a fairly straightforward process, and you can get started by visiting the government’s website. You’ll need to keep records of your expenses, such as eBay fees, postage, packaging, and even your internet usage.
Paying eBay tax on sales
eBay tax refers to the tax applied to consumer purchases, which in the UK includes Income Tax and possibly VAT.
Income Tax:
If your eBay business has grown or if you’re now trading full-time, you’ll need to register as self-employed with HMRC. With the tax-free personal allowance, you’ll only start paying tax if your annual gross profit exceeds £12,570, provided eBay trading is your main source of income.
VAT:
You’ll need to pay VAT if your turnover exceeds the VAT threshold of £90,000 within a rolling 12-month period. The standard UK VAT rate is 20%, though reduced rates of 5% or 0% may apply to certain items in specific circumstances.
Capital Gains Tax (CGT):
Capital Gains Tax applies to personal assets (excluding cars) sold for over £6,000, and it targets the profit made from the sale. In the UK, individual sellers have a tax-free allowance of £12,300 per year. If you go beyond this amount, you’ll need to report and pay CGT to HMRC.
Remember: If you’re feeling overwhelmed or simply don’t have the time to navigate the ins and outs of eBay’s tax regulations, it’s a good idea to speak to an accountant. With their expertise, they’ll help you stay compliant and ensure you’re being tax-efficient.
Navigate eBay Selling & Taxes with Confidence
Tax can be complicated, but don’t let this hold you back from selling online. While, yes, it’s easy to feel overwhelmed by all the rules, we can assure you that it’s not so bad in reality. As long as you bear in mind the advice we’ve shared above, you can continue your side hustle or auctioning off old odds and ends with confidence.
To recap, there are only really a few things to remember:
- If you’re just selling personal items (i.e. not trading), you don’t need to register with HMRC. This only changes if you earn more than £1,000 per tax year, or you sell an item for £6,000 +.
- If your eBay activity constitutes trading or it is your main source of income, you will likely have to pay income tax and VAT on your profits. In these circumstances, you should register with HMRC and may receive a penalty if you fail to pay what you owe.
