For many, selling pre-loved clothes on platforms like eBay or Vinted is a handy way to declutter the wardrobe and earn a bit of extra pocket money. However, with this additional income potentially catching the taxman’s eye, sellers need to be aware.
Since January last year, online selling platforms have been gathering more data about our sales and the extra income we’re raking in. From Etsy to Deliveroo, these platforms are now sharing information with HMRC that could result in a hefty tax bill.
But don’t panic just yet – thrifty sellers can take comfort in knowing this doesn’t apply to everyone. While digital platforms are tracking your sales, it’s actually your profits that HMRC is interested in.
Many people who sell on Vinted often offload brand new clothes at a loss, so they needn’t worry. For instance, if you purchased a new pair of jeans for £50 and then decided to sell them for £5, technically you would be making a loss that isn’t taxable.
However, if you’ve been snapping up cheap clothes or second-hand items and selling them for a higher price, then you might find yourself in hot water. Sales information will only be passed on from bigger sellers, with HMRC receiving your details if you sold more than 30 items in a year to earn £1,700.
So, for those running a successful side hustle, how much exactly will you get taxed?
It all boils down to understanding the trading allowance and how it impacts you.
The allowance is a tax exemption that allows you to earn up to £1000 from self-employment without needing to declare it to HMRC. This could be from casual work, a side hustle, or selling clothes online.
For your first £1000, there’s no need for concern. However, once you exceed this amount, you’ll need to complete a self-assessment tax form which will consider your relevant expenses and result in a tax bill.
To illustrate how this works, let’s take Tom as an example. Tom is a teacher who, between April 6, 2023, and April 5, 2024, does some part-time photography and earns £800.
He also sells some old clothes on Vinted, earning an additional £400. Since Tom didn’t intend to make a profit when he bought the clothes, and they have depreciated in value since then, the £400 isn’t counted towards his £1000 trading allowance.
Therefore, only the initial £800 is considered, which falls below the threshold, meaning he doesn’t need to file a self-assessment tax return.