HMRC explains rules and allowances that apply when selling items online
The tax department warned there are several allowances to bear in mind
HMRC has explained what taxes may apply when selling items online. The tax department clarified the rules after a question from an eBay seller.
The person asked HMRC for guidance if they had sold some items they had bought over the past five years and made a loss of around £3,000 on the purchase price. They wanted to know if they could "offset this against my income tax". They explained why they wanted to know: "If yes I’ve got loads of stuff which I no longer use and I pay a lot of income tax so I would be happy to sell it all."
You pay income tax on your earnings above £12,570 a year, in line with the personal allowance. You pay the tax at 20 percent on your earnings over this level, with the rate increasing to 40 percent for your income above £50,270.
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Responding to the taxpayer, HMRC said: "You can’t offset losses from selling personal belongings against your UK income tax. Capital losses generally only offset capital gains, not income."
The person then asked why eBay sales could be liable for income tax. HMRC directed the person to a tool on the Government website which they could use to check if they would need to tell HMRC about their income from their online sales.
The taxpayer went on to ask for more guidance on the specifics of the rules, asking what would happen if they bought a picture in a car boot sale for £1,000 and then found out later it could be sold for £10,000.
The person asked: "If sold would the gain be taxed? If so what happens if it’s the other way around? Can the loss be offset?"
HMRC said in reply: "If you buy something for £1,000 and later sell it for £10,000, and it’s not exempt, the gain would be subject to capital gains tax. If you sell it for less than you paid, that’s a capital loss, which can only be used to offset other capital gains, not income tax.
"Most personal possessions worth £6,000 or less are exempt from capital gains tax. For items above that threshold, capital gains tax rules apply. Losses on exempt items can’t be claimed."
How much is capital gains tax?
For those who pay the basic rate of income tax, for gains made in the current tax year, the capital gains tax is charged at 18 percent when selling personal possessions above the £6,000 threshold. The tax rate is 24 percent if you are a higher rate or additional rate taxpayer.
HMRC pointed the taxpayer to more detailed guidance on the Government website.
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