The world of pre-loved fashion is abuzz with worry about the looming “side hustle tax” on platforms like Depop, eBay, and Vinted. This new HMRC regulation has sellers in a frenzy, wondering if their passion project will be hit with a tax bill. But take a deep breath, because the answer isn’t a simple “yes” or “no.”
Here’s the lowdown:
- The buzz: Starting next January, these online marketplaces will be required to report the financial details of sellers who make over £1,735 and complete at least 30 transactions in a year. This includes bank details and transaction history. This should not be sending shivers down the spines of casual resellers. Pros that are making a living off of it, possibly.
- The worry: The fear is that this reporting will lead to automatic tax assessments, forcing sellers to pay taxes on their earnings. But fear not, fashionistas and uni students looking to restyle their wardrobe or make some cash to pay the WiFi bill.
- The reality: The key lies in the distinction between personal and non-personal sales. If you’re clearing out your closet, selling off old clothes you no longer wear, you’re likely in the clear. You won’t owe taxes on personal items, even if they fetch a hefty sum.
- The catch: However, if you’re buying things specifically to resell for profit, that’s a different story. Those earnings count towards your £1,000 tax-free allowance. Exceed that threshold, and you might owe some dough to HMRC if you are also earning outside this side hustle. You can earn up to £1,000 from selling things (like online or at car boot sales) before you need to pay any tax, thanks to a special allowance. This is on top of your usual tax-free income of £12,570. So, unless you’re making a major business out of it, you can relax and sell your kid’s old clothes without breaking a sweat.
So, the bottom line?
- If you’re a casual seller decluttering your wardrobe, breathe easy. You’re probably not on HMRC’s radar.
- But if you’re a dedicated reseller running a mini-empire on these platforms, keep track of your earnings and expenses. If you’re approaching that £1,000 threshold, consider registering as self-employed and filing a tax return. If you are paranoid that the tax man is following you around at your next kilo sale then take your side hustle seriously.
- You may find registering as self-employed could legitimise your side hustle. If this is your main income and do not bring in income elsewhere, then your tax liability could still be non-existent or the basic tax rate depending on how much you are earning. However, if you want to expense your inventory then consider registering as a business.
Remember, knowledge is power. Understanding the rules can help you navigate this new tax landscape and keep your side hustle humming smoothly. Don’t let fear paralyse you – stay informed, stay organised, and keep those pre-loved treasures flowing.