When do you need to start paying tax?

For many sellers who start off by selling a few things from around the home, then gradually move to becoming a business, it is easy to forget that you are liable to pay taxes.

Income Tax

What many UK sellers don’t realise is that while you do not need to declare and pay Income Tax on income made from selling a few old household items, you do need to pay it when your selling becomes serious.

For regular sellers, you will be liable for Income Tax because under current tax laws you are considered to be “trading”. You are defined as a “trader” in the UK if you:

Therefore, if you are using the SaleHoo supplier directory to buy wholesale goods which you will use to resell to make a profit, you are liable to pay Income Tax.

You can find out more about this at: http://www.hmrc.gov.uk/guidance/selling/income.html

Sad, but true

I understand that there is a lot of confusion among sellers who have been misinformed by wishful thinkers who would rather believe that they are somehow exempt from paying taxes. Unfortunately for us sellers, anyone who makes a regular profit from selling, whether it is online or offline, is legally obligated to pay tax on the sale.

Tax-free allowances

Most residents in the UK receive a 'Personal Allowance’ for taxation purposes. This is an amount of taxable income you're allowed to earn or receive each year tax-free.

This tax year (2009-10) the basic Personal Allowance - or tax-free amount - is £6,475 (or £124 per week). You may be entitled to a higher Personal Allowance if you're 65 or over.

If you're registered as legally blind, or are unable to perform any work for which eyesight is essential, you can also claim the tax-free Blind Person's Allowance.

Remember that your Income Tax is only due on taxable income that's above your tax-free allowances.

Disclaimer: All above information should be used as a guide only. All sellers are encouraged to seek expert advice from an accountant or tax lawyer for personalised tax advice.