More and more people are turning to online trading in a bid to boost their income, and many successful sellers have in fact carved out careers on the web. Distinguishing between selling a few items on eBay and what constitutes a business is one query that has been explored in great length, and whilst the Budget 2016 brought a string of legislative changes and updates, it also redefined the rules regarding web trading and announced associated tax breaks which are certain to be greeted with open arms by those selling to earn extra money.
Swansea accountancy firm Bevan & Buckland has delivered essential tips and guidance to help online traders everywhere define their activities and discover more about the tax break so they can be clued up prior to its introduction in 2017.
“There are a series of questions that you can ask yourself to determine whether your online trading activity constitutes a business, such as, are you buying and selling items regularly with the main aim to make a profit? Are you making items to sell at a profit? Are you selling regularly online? Are you being paid for a service that you provide online? If the answer to these questions is ‘yes’ then you may be in business and liable to pay tax,” said Sara Dennis, Business Services Manager at Bevan & Buckland.
You may not be trading however if you sell unwanted items occasionally on websites like eBay and do not plan on making a profit, if you don’t buy and sell items often, if your primary motivation for buying the item was not to resell it at a profit or if there was a long period of time between the purchase and the sale of the item or items in question.
Sara added, “In some cases the definition of business selling and personal selling is not always clear cut so you may want to speak to an accountant for further advice.”
It is important to remember that if you are trading you must register with HM Revenue & Customs (HMRC) within three months of trading. However, do not delay registering as HMRC carries out regular checks on online auction sites for members with a high number of transactions. In addition to this, online traders should always keep accurate records of income received from PayPal or via online sites like eBay.
“Be sure to document expenses too, and save your receipts to make it easier to calculate your profit more precisely. A new allowance for the first £1,000 of trading income will be introduced from April 2017. This is of course great news for anyone making small profits from their online trading activities. Under the new allowance, next year individuals with trading income won’t need to declare or pay tax on gross trading income of less than £1,000,” concluded Sara.
Should you require any help or advice regarding your tax liability, please contact Bevan & Buckland today to arrange your free initial consultation. Call 01792 410108 or email [email protected].