The Essential eBay Sellers Guide to Tax

The internet has revolutionised the way that we go about our daily lives. Thanks to the internet it is now possible to book a holiday or buy anything your heart desires without having to leave the comfort of your own home.

eBay is one of the most popular sites on the internet and is very popular with buyers and sellers alike. The reasons why this site is so popular are simple, buyers can purchase products that they want at a greatly reduced price and sellers can get rid of things that they do not want from around their homes.

eBay has made it easier than ever to sell products on the internet and it seems that anybody can become an online e-trader thanks to eBay. The popularity and amount of money spent on eBay and other online auction platforms has caused HM Revenue and Customs to pay attention. HMRC now see that targeting eBay traders is worthwhile. This should not put you off starting your new eBay based business, it is just one of the many things that you must consider.

When do I have to pay Tax?

Understanding when you officially need to pay tax can be a little confusing as it’s actually a bit of a grey area. HMRC say that it all depends on whether you are considered to be trading or not. If you are just selling the odd product from around your home then you won’t normally be expected to pay tax. This means that the majority of eBay sellers do not need to worry about tax.

If however you purchase goods with the intention of reselling them, or make products yourself and sell them on eBay then you will be considered as trading. An easy way to think of this is if you are trying to make a profit then you will be trading. If you purchase any form of stock to resell then you will be trading and liable to pay tax.

Self Employment

When you trade on the internet you will be considered as self employed and you must register with HM Revenues and customs. You might also have to complete a tax return every year depending on your other tax liabilities. It is very important that you register yourself as self employed within 3 months of becoming self employed because otherwise you can be fined.

If you are only trading on eBay occasionally then you might be able to get away without registering as self employed or paying tax. Just make sure that you don’t give HMRC a reason to hound you or cause you problems.
Although thinking about tax might be the last thing on your mind when starting a new business it is important to do so now. The tax man can get quite aggressive if he thinks that he is owed more money than you have paid. By working out your tax liabilities now you will save a lot of stress in the future.

by Amanda O'Brien - 25th June 2009

Back to Top

###

Amanda O’Brien is a successful eBay Powerseller and author of The £2,500 Per Week eBay Powerseller Secrets. Want to learn more about starting an eBay business or simply want to improve your eBay sales? Claim your free report and free sample chapter from The £2,500 Per Week eBay Powersellers Secrets. Available from www.powersellerprofiteer.co.uk