Tax officials have issued a clear warning to millions of people who sell unwanted items on online marketplaces like eBay and Vinted. The guidance from HM Revenue and Customs (HMRC) clarifies exactly when these sales can trigger a tax bill, following a direct enquiry from a concerned taxpayer.
Income Tax vs. Capital Gains: A Crucial Distinction
The case involved a person who had sold personal possessions bought over the past five years, making an overall loss of roughly £3,000 compared to the original purchase prices. They asked HMRC if this loss could be "offset against my income tax," noting they pay a significant amount of income tax and would be happy to sell more unused items.
HMRC's response was definitive. A spokesperson stated: "You can't offset losses from selling personal belongings against your UK income tax." They explained that capital losses can generally only be used to offset capital gains, not other income. Income tax is payable on earnings exceeding the £12,570 personal allowance annually, at 20% for basic-rate taxpayers.
When Do Online Sales Become Taxable?
The taxpayer then questioned why sales on platforms like eBay could ever be subject to income tax. HMRC directed them to an online tool on the official Government website, which helps individuals check if they need to declare income from their sales.
For further clarity, the person posed a hypothetical scenario: buying a picture at a car boot sale for £1,000 and later discovering it was worth £10,000. They asked if the gain would be taxed and if a loss could be offset.
HMRC confirmed that such a profit would typically be subject to Capital Gains Tax (CGT), provided the item is not exempt. Conversely, selling for less than you paid creates a capital loss, which can only offset other capital gains.
The £6,000 Exemption Rule for Personal Possessions
A key relief for casual sellers is the exemption for most personal chattels. "Most personal possessions worth £6,000 or less are exempt from capital gains tax," HMRC noted. For items valued above that threshold, standard CGT rules apply. However, losses made on items that are exempt cannot be claimed.
The tax rates for gains on personal possessions above the £6,000 threshold are 18% for basic-rate taxpayers and 24% for higher or additional-rate taxpayers in the current tax year.
HMRC has urged anyone unsure of their position to consult the detailed guidance available on the Government's website to ensure they meet their tax obligations correctly.
