UK Sellers - Tax question

General
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UK sellers! If I sold over £1000 of cards online through eBay or via Paypal G&S how does the Government tax these sales?

I understand you have this £1000 trading limit where the first £1000 is tax free and you do not have to declare. So when going over £1000 is this just added onto your income tax from your job/other income sources such as rent etc?

My income tax is on the Basic rate as I am earning between £12,501 to £50,000. So my income tax is 20%.

As an example, say I sold £1500 of cards in a tax year would it work out like the below:

£1000 is Tax free
Declare £500 for tax

This £500 is taxed at the basic rate of income tax i.e. 20% so tax payable on these sales would equal £100?

Any help would be appreciated!

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Dang. In the US the cutoff number is $20,000

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The US cutoff number is $0. Tax is due on gains of any amount, but Paypal doesn’t automatically report receipts until $20,000 and 200 transactionsor lower in some other areas as required by local laws.

@fireftw87, I don’t know anything specific to the UK, but I would imagine that similar to in the United States you are only responsible to pay taxes on net gains, not gross sales.

E.g. You said you have £1500 in sales. If you paid £1000 for those cards then your taxable income from card sales was £500 minus any deductions. This would fall under your tax free amount in this example assuming UK allows you to pay on net and not gross income which isn’t too much of a leap.

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I’m not saying that this is right or ethical or the best choice or legal… but…

You can also just not declare this income.

When you get to the 20k where you’re actually making a living income in sales, yeah you should probably be diligent. But for one sale? Do you also declare income when you have a garage sale? I’d imagine most people don’t

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As others have said, they’ll only tax you what you’re declaring. PayPal won’t tell the government, but I think I remember when I’d been paid over about £4K (for work not Pokemon cards) they wanted additional details from me for anti money-laundering purposes.

It does get me thinking though, if you are buying and selling a serious amount of cards, you are much better off doing it through a limited company, then you only pay corporation tax (15% or whatever that is) on profits (but you can offset that against costs as well as cards such as mileage, technology equipment etc).

It gets even more interesting though because you can offset the losses of one limited company onto the profits of another. So I have my main limited company that I use for work, I could set up a new company and buy all my cards through that. I can then offset those company “losses” onto my main company to bring my tax bill down. Definitely worth exploring!

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I PM you :blush:

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I’ve had a business account on PayPal for almost 10 years now. If you use PayPal a lot to buy personal items I’d advise not going down that route, but for me I find it works very well.

I’m still not entirely sure where to draw the line between expenses and taxable income, however. Right now all the money I make from Pokémon is going straight back into the hobby, so technically I’m not profiting.

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Not quite how it works here in the states. There’s something called an inventory tax or the like that could come into play for you.

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The way it works here I wouldn’t really describe as an inventory tax… its more just that you can’t deduct purchases for inventory.

E.g. I buy a card for $1 and I turn around and sell it for $1,001. I’ve made a $1,000 net taxable gain. If I immediately buy a $1,000 card I’ve still got $1,000 in taxable income, and I’ve got a $1,000 inventory to go along with it. If I go ahead and sell that card for $2,000, I now have 0 inventory and $2,000 in gain.

Where it becomes more tricky is when you buy a box for $500, crack and grade all the holos for $100 in grading fees. Now you sell and ship half of them and add a few to your collection. Sales net you $1,600 so you’ve got $1,000 in net taxable income. But wait you added some to your collection so you’ve got to figure a way to account for what part of the $500 was a non deductible personal purchase. Sounds complicated? It is a fair bit but in reality you don’t track it all on a purchase by purchase basis.

You simply track (by estimation of some sort) your total inventory value at each year end and use it to calculate your cost of goods sold for that year. You then subtract cost of goods sold from net receipts and make some adjustments to find your taxable income. As I mentioned any items removed for personal use would also be subtracted out of your cost and there is a line item for that.

Taxes are so misunderstood it’s scary. The system should be simpler than it is, but since everyone is stuck using it they should teach about it more (or at all) in schools. When it comes to business theres really a fair bit of inherent and required complexity.

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Thank you everyone for your input! I understand what people are saying regarding not declaring unless you are selling high value/a large quantity of goods or cards but in the UK the past few years they have been cracking down more on this kind of casual trading:

www.stevenglicher.co.uk/accountants/hmrc-tackles-harmless-online-trading-in-tax-crackdown/

I would rather just avoid any nasty surprises. They introduced this £1000 ‘trading allowance’ a few years ago saying it was to make things simpler and easier for the tax payer, but it also means it makes it easier for them to target people who do not declare their trading fully:

www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

I believe the UK tax office has the power to download information regarding trading on eBay UK users accounts and potentially with Paypal too?

I will try and find the time to call our tax office this week to clarify. Hopefully it will make things clearer and I can post my findings here if others from the UK might find it useful.

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I said, “an inventory tax or the like.”
I agree totally with what you wrote but tried to articulate it in one sentence lol.

Throw out the million page tax code and only use one tax…sales tax. The more you have, the more you spend, hence the more you pay. This gets my vote.

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@garyis2000 I’m open to a single flat consumption tax as well, but every system definitely has its flaws and drawbacks. You’d need some exempt amount or exempt items though so that the lower income folks aren’t overtaxed proportionally to buy the core essentials. Getting to deep into conversation on all that ends up too political though.

Google-ing “inventory tax” actually came up with several states having some form of an actual “inventory tax” too which I dont know exactly how it works but was interesting.

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I just came off a phone call with a agent at HMRC (UK tax office). As far as I understand it this is how personal trading is taxed in the UK, don’t take this as gospel if you are unsure about your own circumstances please check with the tax office but this could be used as a basic guide.

-Anything over £1000 Gross you have to declare to HMRC in full!

-If you are a casual trader and normally fill in a self assessment tax return like myself you will be taxed at the rate of income tax within your UK income tax band i.e. for myself it is 20% as I earn per year between £12,501 to £50,000 - www.gov.uk/income-tax-rates

Here is where it gets a little confusing/interesting

Depending on what works out more beneficial tax wise for you, you can choose only 1 of the following options:

Option A - Minus your expenses off your gross sales and be taxed on the remaining amount.

Or

Option B - Deduct the £1000 tax free allowance from your gross sales then be taxed on the remaining amount.

Example A:

I sell £2000 of cards gross for the tax year on eBay.

My expenses/costs are £1200.

I would claim the expenses of £1200 in order to be taxed on the remaining £800 @ 20% which would equal £160, this is the cheaper option.

If I chose to deduct the £1000 tax free allowance I would be taxed @ 20% on £1000 which would equal £200 so I would end up paying more.

Example B:

I sell £2000 of cards gross for the tax year on eBay.

My expenses/costs are £500.

I would opt to claim the £1000 tax free allowance so I would be taxed @ 20% on £1000 which would equal £200, this is the cheaper option.

If I chose to claim expenses of £500 I would be taxed on the remaining £1500 @ 20% which would equal £300 so I would end up paying more.

Hopefully this makes sense and is helpful!

The other issue I have now is working out how Capital Gains Tax Works for items I have held in my personal possession for a number of years if i choose to sell them. :face_with_spiral_eyes: So confusing.

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If you want to Self Assessment tax so it means any balance tax paid by the assess on the assessed income after returns Tax Deducted at Source (TDS) and Advance tax into account before filing the Return of income. Self-assessment tax is paid for a specific financial year-end.

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Hi, not sure on whether it falls under this but on the UK Gov website:

*Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

It’s the gain you make that’s taxed, not the amount of money you receive.

Example

You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).

Some assets are tax-free. You also do not have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.

You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).

The Capital Gains tax-free allowance is:

£12,300

£6,150 for trusts*

…Income tax is different from Capital gains but again this isnt my expertise!

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I looked into this and there’s a lot of grey areas between being a collector and business:

If you are buying and selling frequently in an organised fashion and in a short timeframe, then it’s harder to argue that you are just a collector and not a business. Especially if it’s modern sealed products.
If you have have owned the cards for years (usually 12 months+) then you don’t count it because it’s regarded as a personal item more than something bought to intentionally make a profit. You only pay capital gains tax on items of high value (something like over £6k) so there is nothing to declare if you have owned a slab for years and it is now worth £5k or £5k more than you paid for example.

Personally I do this:
Keep track of all sales/expenses/fees in a spreadsheet to work out the net profit of each item.
If anyone ever asks, I have the spreadsheet ready to prove that I haven’t went over any limits and don’t owe any tax. My current financial situation is slightly complex as I don’t have traditional income so for me the profit doesn’t add on to a salary, if you have a job then I think it may just add on to your salary and you pay tax on that once the allowance is met.

Overall if you are just collecting and occassionally selling cards now and then you should be okay unless you have thousands or tens of thousands in turnover. Bearing in mind it’s pretty difficult to make any meaningful net profits from flipping cards unless you are only doing higher end items. If you get scammed on one slab, that can easily wipe out 1 or 2 months profit

What I do wonder is what grading would be counted as. Say you grade 300 cards then get them back a year later and sell some. That could be argued either way unless it was obvious that you were constantly selling hundreds and making a lot from it

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I appreciate that people want to be helpful but this thread is over a year old. It gets the anchor treatment.