How Much Tax Do I Have to Pay When I Sell Things Online?

Do I Have to Pay Tax When I Sell Things Online?

Taxes are an important part of any business. Unpaid taxes could lead to serious and strict legal actions against you. However, there are some more complications when it comes to taxations the practice of selling items online.

Now, you are not basically liable to pay tax on the small things you sell on eBay, Etsy, or any other online platform. Additionally, even if you have a job and occasionally sell things online, even then you will not be liable to pay your taxes.

However, you will be required to pay for taxes as per your income from such practices if you do business out of selling things online. Whether you are making losses or profits in your online selling business, as long as you are selling things online with the intention to earn a profit, you will be required to pay taxes and submit Self-Assessment to the authorities.

Related Links:

Selling Online Through eBay – Tax Implications

Selling Online Through Amazon – Tax Implications

Does My Online Selling Count as a Business?

Although ascertain whether your business is counted as a business or not is a tough nut to crack, here are some basic questions you need to ask yourself while wondering whether you have a business or not:

• Are you buying or making things just to sell them online?
• Is there a profit motive involved in the entire process?
• If your practice of selling things online to get rid of things primarily?
• How often do you sell things online?

Are there any other kinds of online businesses or services that are covered?

There are some kinds of services that can be rendered online and still fall in the ambit of being taxed, here they are:

• Renting out homes to tourists.
• Renting out your home, business premises, or any other property for solely making a profit or for business purposes.
• Offering services for doing tasks.
• Renting out of your personal equipment for use.

Although all these additional services do not count as businesses, they are referred to as ‘sharing economy’ or ‘peer-to-peer’ and are taxable.

When do you begin paying taxes?

Whatever your business or income may be, you do not pay taxes until you go over the limit of allowances. You are free of taxes and other liabilities as long as your income falls among the tax-free allowances. But once you cross the tax-free allowance zone, you will have to pay the tax.

Also, if in the coming year you still fall under the tax-allowance zone, remember that you will not have to pay the tax.

When don’t you need to pay?

Taxes on selling objects or items online is limited to the kind of practice you take up. As long as your work or selling of products is not a business and happens only at some times or occasionally, you will not be required to pay taxes at all.

Selling products online without the intention to make profits or gains are not taxable. Furthermore, the frequency of your selling activities also helps in deciding how much tax you need to pay.

However, if you are liable for Capital Gains Tax, you may have to pay that too, depending on your circumstance.

How do I pay Income Tax?

You can pay income tax for your online selling activities as other taxes without any problems. You will need to fill out the self-assessment form and submit it to the HMRC as per their requirements.

Other than this, companies such as eBay, help you generate and submit your self-assessment form directly from the website itself.

In this form, you will need to specify your income for the year and submit your tax return as per your income.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.