Do I pay tax on money I make selling things online?

The platform reporting rules that took effect a few years ago caused widespread alarm, largely because the coverage suggested a new tax on selling old clothes. There is no such tax and there never was. What changed is that HMRC now receives data from marketplaces, so the pre-existing distinction between clearing out and trading is far more visible.

Step by step

1. Decide whether you are trading.HMRC uses a set of long-established indicators — is there a profit-seeking motive, how frequent are the transactions, was the item bought in order to sell it, was it modified to make it more saleable, how was the sale organised and financed. Occasional disposal of your own belongings sits clearly outside them.
2. Treat clearing out your own possessions as untaxed.Selling clothes, furniture, a phone or a games console you owned and used is not trading income. Most personal possessions are also outside capital gains tax through the chattels rules — the exceptions are individual items sold for large sums, and things like jewellery, art and collectibles.
3. Compare trading income against the trading allowance.There is a flat allowance for trading and miscellaneous income. Below it, in most cases, there is nothing to report. Above it, you either deduct the allowance instead of expenses or claim actual expenses, whichever is better. It is a single allowance across all such activity, not one per platform.
4. Measure it on income, not profit, when testing the threshold.The trading allowance is tested against gross income before costs. It is entirely possible to be above the threshold on turnover while making very little, and that still creates a reporting obligation.
5. Understand what the platforms report.Under the OECD digital platform reporting rules, marketplaces report seller identity and total proceeds annually where a seller passes a defined number of sales or a proceeds threshold in the year. They also give you a copy. It is data sharing, not tax deduction.
6. Register and file if you are trading above the allowance.That means self assessment. See the guides on whether you need a return and on registering, and note the 5 October registration deadline after the end of the tax year.
7. Keep records from the beginning.What you paid for stock, platform and payment fees, postage, packaging and any mileage. Fees alone are frequently a substantial proportion of the sale price, and the difference between turnover and profit is exactly what records prove.
8. Answer an HMRC letter rather than ignoring it.A nudge letter based on platform data usually asks you to check and confirm. Where the sales were your own belongings, say so plainly and keep whatever supports it. Getting free advice from TaxAid or Citizens Advice is sensible if the amounts are significant.

Common mistakes

• Assuming the reporting threshold is a tax-free allowance — It is a platform reporting trigger, not a tax threshold. Trading below it is still taxable if it exceeds the trading allowance; selling your own possessions above it is still not taxable.
• Testing the trading allowance against profit — It is tested against gross income. Fees and postage do not come off first for that test.

Questions people ask