A 2024 HMRC eBay tax guide

Selling on eBay is a very popular method of running an ecommerce business. Whether you're looking to run it as a side-hustle or as a full-time job, you need to know the HMRC rulings around it.

This blog will focus on breaking down what you need to know about considering for HMRC eBay tax. This way you can focus on selling without worrying that negative feedback from HMRC is coming.

How much, and what type of tax do eBay sellers have to pay?

Now, as part of the HMRC crackdown on 'side hustles', eBay will share information about seller income with them. This means that if you earn more than £1,000 on eBay in a year, you'll need to register as self-employed and report it to HMRC. 

Income Tax

Provided you earn over the £1000 ‘free trading allowance’ and have hence been required to register as self employed, you will be liable to pay tax on profits from your eBay business at the following rates, depending on which band you fall into:

Please note that these tax rates apply to England, Wales and Northern Ireland only.

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To figure out your profits, deduct your claimable expenses from your self-employed income, then apply the relevant tax rate to that figure. Or just use our helpful tax calculator, it’s so much easier! 

If you are both employed and self-employed, i.e. eBay is a side-hustle for you, then you would pay tax on your employment income via the PAYE system, and pay tax on your profits from self-employment (eBay in this case) as above through self-assessment.

Please note that you will still need to declare any employed earnings in your self assessment so that your taxes are computed on your whole income and relief is then given for any taxes already paid. 

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National Insurance Contributions (NI)

Self-employed individuals with profits exceeding £12,570 must pay Class 4 National Insurance contributions. For the tax year 2024 to 2025, Class 4 National Insurance contributions are:

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270.

For those with profits less than £6,725, there is an option to make a voluntary class 2 NI contribution of £3.45 per week. This will be recommended especially for those with sole income from self employment as making that payment contributes towards state pension entitlement when they retire.

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Value Added Tax (VAT), Import Duty and Goods and Services Tax (GST) for UK and international eBay sales

Here’s where paying tax for selling on eBay can get complicated. There are taxes for items you sell and buy on eBay. We are focusing on selling in this article, but you can read a detailed explanation of taxes on eBay purchases here.  

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VAT on eBay sales in the UK and the EU:

You might be required to collect/charge VAT on goods you sell on eBay if you are based in the UK or the EU.  

In the UK, VAT is a 20% tax on some goods and services, including eBay sales, for VAT registered businesses (businesses with £90,000 annual VAT taxable turnover). If you're VAT-registered, you are required to charge VAT on your sales and transfer it to HMRC yearly.

If you're importing or exporting you should always fully research VAT rates and other tax regulations of the country you're selling to. Again, things start to get challenging here so we strongly recommend familiarising yourself with eBay VAT obligations in the UK and the EU.

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Tax on eBay fees:

Lastly, VAT, GST or other consumption taxes may be payable on eBay fees that you pay for listing items on the platform. They’ll be added to your seller invoice as a separate charge or already included in the fees.

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Capital Gains Tax (CGT)

In the UK, Capital Gains Tax applies to profits from selling personal assets (excluding cars) worth over £6000. It's the gain, not the sale price, that's taxed. 

Any gain below the £3000 annual allowance is tax-free, and does not need to be reported to HMRC.

So if you buy a porcelain vase for £7000 and sell it for £9999 on eBay, then you don’t pay any Capital Gains Tax on this asset. However, if you sold the vase (or multiple other assets) for a gain of more than £3000, you’ll pay CGT on it.

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How to pay your tax to HMRC as an eBay seller

The process of paying tax as an eBay seller is the same as for other forms of self-employment, which involves completing a tax-return either online or by paper form. 

We highly recommend doing the online method as it’s far quicker and easier. Check out our guide on how to file your tax return online to learn how.

If you are VAT registered then as a result of the government’s ‘Making Tax Digital’ (MTD) initiative, you must now report your VAT collections digitally using MTD compliant tax software.

One important tip for paying your tax as an eBay seller is to use an ecommerce accountant. They can make the experience of filing your tax return infinitely less stressful and save you money from hidden tax reliefs and rebates.

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Want more helpful tips for ecommerce success?

For specialist tips on how to achieve ecommerce success take a look at one of our free online webinars with our own in-house experts. You can also explore our services here.