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My new year resolution for 2025 was to declutter our home before moving house later this year, so I began using an online selling service. However, HM Revenue & Customs’ guidance suggests people who trade second-hand items through online selling services may need to pay tax and register for self-assessment. How much tax will I need to pay if I continue to sell unwanted items online, and is it worth it?
Zena Hanks, private wealth partner at Saffery, says online platforms will soon start sharing sales information and the personal data of its users with HMRC. If an individual has sold a certain number of items, generated sales of £1,700 or more, or provided a paid-for service on a website or an app in 2024, they will be contacted by the platform in advance of their personal details and sales information being shared with HMRC. The principles of whether the sale of items or the provision of paid-for services is taxable remains unchanged.
The sharing of information is a move towards more transparency for the online platforms and underpins HMRC’s efforts to tackle what it perceives to be a tax gap. With that in mind we need to be clear what does and what does not need to be reported to HMRC.
Getting some money back for items no longer needed as part of a declutter is unlikely to qualify as an activity that generates a tax liability for two reasons. Under first principles there is likely to be a cost associated with the original acquisition of the item which would be taken into account when working out if any tax is due. In addition there needs to be an intention to make a profit. In the situation described here there is no suggestion that the sale is being motivated by a profit and it is likely the items sold would not generate sufficient proceeds to generate an overall profit.
You do however need to report sale activities when you are selling assets at a profit — for example you upcycle furniture, or you source clothes or furniture to sell on at a profit, or if you sell any personal possessions for more than £6,000. There is a reporting requirement if you provide paid-for services for example garden maintenance, dog walking, taxi driving, delivering food. In addition, income and free products received from social influencing may also generate a taxable activity — all of this depends on the numbers involved. If there is sufficient activity and income, that may generate an obligation to report the income details to HMRC and any associated tax will need to be paid.
The rules on how to tax trading activities haven’t changed and that includes the availability of the £1,000 trading allowance. What has changed is that online platforms are being compelled to provide sales information and the associated sellers’ personal information to HMRC. It is that information that HMRC will use to ensure that those generating income are paying the correct amount of tax. If you are in any doubt you should speak to a professional adviser as soon as possible. If income does need to be reported it is always better that an “unprompted” disclosure is provided to HMRC.
Can my son save his job by becoming self-employed?
The management at the local golf club where my student son works part-time have told him that they are struggling to remain profitable, so they will not be replacing anyone who leaves. To ensure that my son keeps his job, could he offer to work as a self-employed contractor who invoices the golf club for hours worked?
Rachel Roberts, a partner in the employment and immigration team HCR Law, says the option of offering to work as a self-employed contractor may seem like a good solution but there are key considerations that your son may want to think about. First, and most important, it would not be possible for your son simply to switch from being a part-time employee to self-employed if, in practice, the nature of his role and his duties remain the same.
While your son and the club could agree to change the label of his employment, there is a real risk that HMRC would challenge this. HMRC would apply a variety of tests to determine if your son is providing his services as an employee under the “disguise” of self-employment.
The key difference between whether your son will be treated as a self-employed contractor or an employee is the degree of control the club has over him. For example, if your son is unable to choose his working hours, work for other businesses or appoint someone else to provide the services on his behalf, then there is a high probability that he will be treated by HMRC as an employee. This could have tax implications as HMRC could serve a demand for backdated PAYE and national insurance payments.
Even if your son’s work does meet the criteria needed to be deemed as self-employment, he will need to bear in mind that self-employed contractors accept a higher level of financial risk. Your son would be responsible for filing his own tax returns. There is also a risk of personal liability if your son provides his services directly to the club rather than through an intermediary, such as a limited company.
Our next question
My partner and I got engaged over Christmas and we’re excited to begin thinking about setting a date for the wedding. My wife to be is an entrepreneur and last year I made an investment into one of her small businesses through the Seed Enterprise Investment Scheme (SEIS), to help the business grow and for the tax advantages the scheme offers. I plan to make further such investments over the coming years. However, am I right in saying that being married to the owner will affect my eligibility to invest in the company via the SEIS scheme? If so, are there any alternative venture capital schemes that I could use which offer tax relief?
Another key consideration is that your son would be offering to give up his employment rights. Self-employed contractors are not afforded the same employment rights as employees. For example, your son would not be eligible for sick pay or holiday pay. The golf club could also terminate any contractual agreement with your son on relatively short notice if his services are not needed.
At this stage, it might be premature for your son to initiate discussions about working on a self-employed basis, particularly if his sole aim is to keep his job. The good news is that the club is considering alternative options to dismissal, such as freezing recruitment (as you have mentioned).
If the situation worsens, the club could consider other cost-cutting measures, such as reducing the number of working hours or shifts and possibly even reducing the rate of pay. Depending on how long your son has worked for the club, he could be entitled to a statutory redundancy payment if his role is terminated.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com.
