The agency has explained the various tax allowances that apply
HMRC has clarified which taxes apply when selling items online, following an enquiry from a taxpayer. The person asked HMRC whether they could “offset this against my income tax” after selling items purchased over the past five years at a loss of approximately £3,000 on the original purchase price. They explained why they were asking “if yes I’ve got loads of stuff which I no longer use and I pay a lot of income tax so I would be happy to sell it all.”
Income tax is payable on earnings exceeding £12,570 annually, in accordance with the personal allowance. The tax is charged at 20 per cent on earnings above this threshold, rising to 40 per cent for income over £50,270. In response to the taxpayer, HMRC stated: “You can’t offset losses from selling personal belongings against your UK income tax. Capital losses generally only offset capital gains, not income.”
The person then questioned why eBay sales can be subject to income tax. HMRC pointed the person towards a tool on the Government website which you can use to check if you need to inform HMRC about income from your online sales.
The taxpayer asked for more detailed guidance on the specific rules. They asked what would happen if they purchased a picture at a car boot sale for £1,000 and then discovered it could be sold for £10,000.
The person asked: “If sold would the gain be taxed? If so what happens if it’s the other way around? Can the loss be offset?” HMRC responded: “If you buy something for £1,000 and later sell it for £10,000, and it’s not exempt, the gain would be subject to capital gains tax.
“If you sell it for less than you paid, that’s a capital loss, which can only be used to offset other capital gains, not income tax.” The group added: “Most personal possessions worth £6,000 or less are exempt from capital gains tax. For items above that threshold, capital gains tax rules apply. Losses on exempt items can’t be claimed.”
How much is capital gains tax?
For those paying the basic rate of income tax, gains made in the current tax year attract capital gains tax at 18 per cent when selling personal possessions above the £6,000 threshold. The tax rate rises to 24 per cent if you are a higher rate or additional rate taxpayer.
HMRC directed the taxpayer to more detailed guidance on the Government website.
