Why are online traders being targeted?
In recent years the taxman deems everybody to be trading if you’re selling online, the word hobby doesn’t feature in their vocabulary!
We’re not talking about people selling a few old clothes or bits of furniture on eBay but we’re talking about what the Revenue call Badges of Trade – things that indicate that what you are doing is more than a hobby.
I’ll list them as are you probably trading in the eyes of the Taxman if:-
• You are doing a number of similar transactions every week
• You have a profit-seeking motive
• You are selling as part of the wider business that you run anyway so maybe doing something as a sideline
• You alter or modify goods or materials to make something different that you then sell
• You regularly buy in purchases each week for resale
• You have a business bank account or have obtained any Finance to fund the business
If you can answer yes to any of those things above then you’re likely in the Revenue’s eyes to be a trader and subject to income tax and NIC!
What’s the income threshold?
Well the taxman doesn’t really have any thresholds in mind when launching an enquiry (although there is a new limit of £1000 tax free profit see below*) and they do obviously like to go for the bigger people, but it’s much easier to go for the little man – so if you are trading on an online platform like eBay or Amazon
* If your annual gross trading income is £1,000 or less, from one or more trades you may not have to tell HMRC, however there are circumstances when you must register for Self-Assessment and you also need to keep good records – so consult an accountant or specialist in any doubt.
You can of course earn up to your personal tax-free allowances of about £12,000 a year without having to pay tax- so if it’s your only source of income, as long as your profits fall below those tax-free allowances, you won’t pay any tax anyway – but there are other traps you can fall into.
What is one of these traps?
Well if you are claiming child tax credit or working tax credits you do have to declare any other income you’ve got – so at the end of any tax enquiry if you’ve claimed child tax credits HMRC are likely to pass that information on to them – so I can help you with that as well.
What to do next?
Call me and anyone who tells anything to me it is in the strictest confidence. I’ll give them advice over the phone to put their mind at rest or I’ll deal with it for them. They shouldn’t be frightened to ring me I’m not the taxman! so just give me a ring at the number on my website or drop me an email and I’ll get straight back to them on email@example.com or 07584 706664