CMA Accountancy Guide to Internet Selling
Nowadays it is very popular for people to enjoy a second income by selling goods on the internet.
I’ve sold stuff on ebay. Do I have to pay tax?
Don’t worry if you just sell personal items such as books or records that you find when you are clearing out your loft. This is not seen as a business and you do not need to declare these sales but if you purchase goods with the intention of reselling them for a profit then you must register as a business with HMRC.
Anything you sell that is yours – for instance, you have already used it or bought it by accident – is not taxable. Neither do you need to set up as a business.
But the moment you buy, make or take anything with the intention of selling it on you are a business and must register with HMRC as a business, whether you choose to be self-employed or even a limited company. You can of course be both a private and business seller, in which case you should use different ebay and bank accounts to keep them separate.
Here at CMA we help a number of businesses that trade purely online. Given the ease with which you can sell goods via eBay, the attraction to potential entrepreneurs is obvious. The start up and running costs are minimal, and you can easily run your business if you still have a regular job. However, despite how appealing setting up an eBay business may be, you need to be aware of your legal obligations – particularly when it comes to paying tax on your profits.
Things you should DO when starting an eBay business:
1. Set up accounts at wholesalers, preferably a credit account. This way you buy from the wholesaler, sell it on eBay, get paid and then pay the wholesaler 30 days later.
2. Open an account with eBay and get their free listing tool for your adverts.
3. Open a Paypal account so you can take payment via credit card.
4. Look for deductions that can offset against your income for example: Equipment Purchases, Business Expenses, Motor Expenses, Home Office Expenses and Travel Expenses.
5. Keep good records of everything that is bought and sold. This will also help in keeping track of orders.
6. Invest in an accounting software package that will help you with your business accounting.
7. You may need to consider registering for VAT if your turnover exceeds the current limit of £73,000 per year. VAT applies if you are selling goods throughout the EU.
If you have recently started to trade online or are thinking about this and would like to ask any questions then please get in touch and we will be happy to answer any questions you may have.