Making extra cash selling second-hand can provide a much-needed income boost but is the taxman due a cut of the money you make?
Selling on eBay or Vinted are both easy ways to get started selling second-hand.
Depending on which site you use - you can sell anything from clothes to books and even larger items like furniture online.
And there are plenty of other sites you can use including Facebook Marketplace and Gumtree.
If you’re happy to get up early at weekends – you can always go along and pay for a pitch at your local car boot sale.
Alice Haine, personal finance analyst at Bestinvest said: “Households can make small sums of money from the clutter in their home and it is far more sustainable to give unwanted items a new life elsewhere than just dump them in the tip”.
Do I need to pay income tax when selling second-hand?
This can depend on whether you’re selling your personal belongings, or intentionally buying items with the aim of turning a profit.
A spokesperson for HM Revenue & Customs (HMRC) said: “If you are just selling unwanted items that have been lying around your home, it is unlikely you will have to pay tax”.
“In order to pay tax on the goods you sell, you either have to be trading or make a capital gain. If you are trading you will be self-employed.”
Sarah Hollowell, Tax & Trustee Services Director at Killik & Co said:
“There should be a distinction between someone who is selling stuff that’s been hoarded in the loft for many years and someone who might have built up a collection of valuable items they’ve held onto until their value increases - Lego is a very good example”.
Buying and selling second-hand for profit
If you are buying and selling with the aim of making a profit, say snapping up old furniture at boot fairs and revamping items to sell them on – this can be deemed as trade.
Sarah Hollowell says in this case, “you would need to register as self-employed with HMRC and pay income tax on profits you make”.
eBay itself recommend seeking, “professional advice about your tax obligations” if you sell on the site as a business.
What is the trading allowance?
Since 6 April 2017, individuals have been able to boost their income by earning an extra £1,000 a year tax-free.
This tax allowance is known as the Trading allowance and includes buying and selling online as well as money made from casual jobs like dog walking, babysitting, gardening or renting out your driveway.
You can earn £1,000 in each tax year this way. As a general rule, this means there is no need to tell HM Revenue & Customs or pay income tax on the money.
The trading allowance is in addition to your tax-free personal allowance. This is the amount you can earn before paying tax and is currently £12,570.
What should I do if I earn over the £1,000 trading allowance?
If your extra income is over £1,000 - you should contact HMRC to let them know as you may need to fill in a self-assessment tax return.
You may also need to pay tax on the extra income earned.
Capital gains tax when making big profits
It may seem unlikely that selling off unwanted items around the house could make you big money.
But, if you make a substantial profit when selling certain items - you could be liable for capital gains tax.
Alice Haine said: “If you make a profit when you sell or dispose of a personal possession worth £6,000 or more, such as jewellery, antiques, paintings, coins or stamps – but not your car – then you do need to consider the tax implication of that sale”.
- How to sell on eBay: a seller’s guide to the online marketplace
- How to sell on Vinted
- eBay vs Vinted – which is better for selling your pre-loved items
- How to turn your unwanted clothes into cash
- How to make some extra cash? 14 clever ways to boost your bank balance
- How to turn unwanted Christmas gifts into cash
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