According to Instagram, 2024 is supposed to be the year of sustainability, with reselling platforms becoming more popular than ever, thrift hauls trending, and even Gen Z are starting to pay attention. However, sustainable fashion has been in the news recently for all the wrong reasons, as HMRC announced that they would expect reselling apps such as Vinted, Depop and eBay to share information about how much their users are making. Understandably, it has led to panic as people wonder if they will have to pay taxes just for selling their unwanted stuff.

The confusion is due to new rules that are in place from the UK signing up to the Organisation for Economic Coperation and Development in attempt to take action on tax dodgets. However, the taxation of side hustles is nothing new but digital reselling platforms having to report the income of their sellers to HMRC is.

These platforms will provide information on sellers who make £1000 or more a year and have completed 30 or more sales. This will come into effect at the end of January 2025.

Okay, So Do I have to Pay Tax When I Sell My Old Clothes Online?

The important differentiation of who must pay tax is answered by separating those selling unwanted personal items and those buying and selling items for profit. The former means you’re selling your personal items for a value lower than what you originally paid. If that sounds like you, you won’t have to pay any tax, even if you make over £1000 a year from it.

Use this calculator on the government's website to check if you must pay tax for selling your personal possessions.

I have a Depop/eBay Shop and I Sell For Profit, Will I Have To Pay Tax?

If you have a shop on a reselling platform where you are buying and selling with the intention of making a profit and it is additional income, then HMRC classifies this as trading and you may need to pay tax. Your personal allowance can only be used once, and HMRC will typically apply this to what they see as your main source of employment (normally the one that pays you the most).

The tax-free trading allowance means you do not have to pay tax on gross income from self-employment or casual income below £1000. This is applicable to all side hustles, including those providing services such as babysitting or gardening.

If your total gross income from trading is more than £1000 in revenue a year, you may be able to claim partial relief using the trading allowance, but you cannot use it in addition to deducting expenses. You must register for self-employment with HMRC, submit a self-assessment, and pay tax.

If your total gross trading income is £1000 or less, you can use full relief using the trading allowance. You do not need to register for self-employment with HMRC or complete a self-assessment tax return. However, it might be a good idea to register for other reasons that are set out in this article.

If your reselling shop is your only source of income (you are solely self-employed), you can use your personal allowance just like someone who is employed. Income tax is paid on your trading profits, not total income. If your profits are less than £12570, you will pay £0 income tax on it. The bands for what income tax rate you will pay based on earnings can be found here.

Okay, I Need To Start Paying Tax For Selling Clothes For Profit. How Do I Do It?

You will need to register for self-assessment with HMRC and declare your income. Tax returns must be completed by 31 January for the previous tax year. Tax years run from the 6th of April to the 5th of April the following year. The last date you can register for self-assessment is 5th October, i.e 6 months before the tax year ends. Keep all records of your income, including receipts for purchases of items, invoices from items you’ve sold, and expense receipts for modifying the items.

What If I’m Selling High-Value Items?

You may have to pay Capital Gains Tax on high-value items such as jewellery that has increased in value by £6000 or more. This number relates to the gain/profit you have made, not the total value of the asset. However, you don’t need to pay Capital Gains Tax on personal possessions with less than 50 years of life. Read more about it here.

What Information Will Reselling Platforms Need To Provide To HMRC?

Platforms will start requesting new sellers to share their National Insurance numbers with them, and existing sellers will also have to declare this information by 2025. This will be one of the pieces of information that reselling platforms will share with HMRC. They will also be reporting income and sales from sellers that trigger the threshold.