Selling things online - HRMC, capital gains tax vs income tax

[premmington]

No. Using personal money is exactly what a sole trader is as they have no legal separation to business they conduct unlike a limited company.

Agree 100% with the above.

Most sole traders do have separate business and personal bank accounts - but that would not cut much water if the IR landed. Most people buy work things from a business account and personal things from a personal account - but then when you start transfering money between the two - it complicates it a bit.

Only way to separate your affairs is going Ltd. And be an director/employee of your business. Then there is defined taxable income being passed between personal and business accounts.

 

[Craig-SM]

If I buy an asset for personal use using net income (ie income which has had income tax deducted)... can that ever be classed as anything other than a personal asset?

Interested to see if I'm missing something here. I can see there's lots of detailed discussion...but mostly it seem to relate to either trade or business assets which have been purchased with some sort of pre tax income / revenue...not interested in these as they're already covered in my case.

If you use that asset to generate income, then yes.
You buy a 3D printer to play with but you find you’ve fallen on a little idea that is very helpful so you print a dozen off and sell them onto others. That is trading.
You are now using the 3D printer as a business tool. When you sell it you’ve only lost £100 over what you’d bought it for.
The dozen items you sold and the printer account for less than £1,000 you claim the £1,000 trading allowance.
If it had exceeded a £1,000 then you would declare it as self employed trading income but also put your expenses against it for the cost of buying the machine and the materials, electric and postage of the dozen items you made. The end figure is what you’d pay tax on.

 

[Pigeon_Droppings2]

If you use that asset to generate income, then yes.
You buy a 3D printer to play with but you find you’ve fallen on a little idea that is very helpful so you print a dozen off and sell them onto others.

Except I clearly stated the asset was for personal use...but I'll play along with the example as it's interesting I think to aid my understanding.

The 3d printer is still a personal asset...up to the point where it's cost is offset against incoming untaxed revenue....then we're into the territory of trading/business assets/expenses.

If the 3d printer cost is never offset against business/trade revenue it remains a personal asset?...but of course the revenue from the sale of printed items is taxable.

Does that sound correct still?

 

[ajlelectronics]

Except I clearly stated the asset is for personal use.

Irrelevant if you are creating a profit.

 

[Pigeon_Droppings2]

Irrelevant if you are creating a profit.

If you are creating a profit then clearly you are trading....and that profit would need to be declared and taxable.

I think I'm giving up on this thread...its not really moving forwards!

 

[ajlelectronics]

If you are creating a profit then you are trading aren't you....and that's already taxable.

The sole issue is one of the "gain". It is only that which is taxable, you could spend £100k and spend £100k trading and not be liable for tax as there is no gain, but it has to be declared. The Profit and Loss account determines the tax liability if any is due regarding profits over the threshold.

However the rules are that if your total additional INCOME as a PAYE employee exceeds £1000, then you have to declare it whether or not you have made a loss or a profit. Those figures come a little later in the tax calculation.

 

[Pigeon_Droppings2]

I posted an accounting link a while back that explains it well I think..."Selling your old stuff" is my situation....yours might be different of course.

I'm done with this one.

 

[ajlelectronics]

I posted an accounting link a while back that explains it well I think..."Selling your old stuff" is my situation....yours might be different of course.

I'm done with this one.

Selling "your old stuff" is irrelevant. If turnover exceeds £1k you are meant to report it. If you have made a profit on that turnover, it is likely taxable.

 

[Craig-SM]

Except I clearly stated the asset was for personal use...but I'll play along with the example as it's interesting I think to aid my understanding.

The 3d printer is still a personal asset...up to the point where it's cost is offset against incoming untaxed revenue....then we're into the territory of trading/business assets/expenses.

If the 3d printer cost is never offset against business/trade revenue it remains a personal asset?...but of course the revenue from the sale of printed items is taxable.

Does that sound correct still?

Yes, you could declare a cost of running the machine and maybe a fee for use of which you would declare as part of the income so the printer is not treated as a business asset. The same principle as you claim mileage allowance for your personal car used for business use. The difference would be that you claim it as income and also an expense against making the item.

 

[knighty]

Selling "your old stuff" is irrelevant. If turnover exceeds £1k you are meant to report it. If you have made a profit on that turnover, it is likely taxable.

that's not true

I googled it for a quote so it's not just my opinion

If you are just selling some unwanted items that have been laying around your home, such as the contents of a loft or garage, it is unlikely that you will have to pay tax.

If you buy goods for resale, or make goods with the intention of selling them for a profit, then you are likely to be trading and will have to pay tax on your profits.

their "it is unlikely that you will have to pay tax" is just there so they can stop someone flouting/twisting the rules

 

[ajlelectronics]

that's not true

I googled it for a quote so it's not just my opinion



their "it is unlikely that you will have to pay tax" is just there so they can stop someone flouting/twisting the rules

Which is exactly what I said. It is only the profit margin, if any that would attract the government's parasites.

 

[knighty]

Which is exactly what I said. It is only the profit margin, if any that would attract the government's parasites.

that's what you said?

there's no need to report "turnover" if you're just selling your old stuff, no matter how much you sell

 

[ajlelectronics]

Do I need to register with HMRC if I don't earn more than £12,570?

I have been offered a casual job that works on an ad hoc basis, and I won't earn over the income tax threshold. Do I have to tell HMRC? And how will I pay National Insurance?

www.thisismoney.co.uk

 

[Smouser]

I think the long and the short of this thread = HRMC's guidance, rules and explanations are not great. It is not easy to understand for the average person. Hence there are so many news articles and other agencies trying to make sense of it/explain it.

Even after reading all of the guidance and explanations there are still things that could be 50/50 and it depends on how HRMC sees it.

 

[MetalMonkey]

I don't think it has to be as complicated as it might appear, unless you want to make it so.

If you are selling the odd thing, chances are they won't be interested.
If you are constantly selling stuff on eBay/Etsy/Vinted etc - then you probably are trading, even if you consider it a hobby.
The advice seems to be - if it is your "side hustle" then you should be paying tax on it.

I believe the £1000 trading allowance thing includes any expenses as well - so postage charges etc you can't deduct.
I suspect it only becomes complicated if you are constantly sailing close to the thresholds and trying to stay one side of them. A bit like VAT registered.

 

[Seadog]

https://www.moneysavingexpert.com/news/2024/01/online-platforms-etsy-vinted-airbnb-report-hmrc/