eBay business or private seller: which are you?

Am I a private or business seller on eBay?

HMRC says you're probably trading if you sell goods you bought intending to sell for a profit, or goods you made, including things you make as a hobby. Selling personal possessions, things you bought or were given for your own use, isn't usually trading.

eBay's business seller policy uses a similar test. If you sell items you bought to resell, make items to sell, or buy items for your business, eBay says you must register as a business.

What are HMRC's badges of trade?

In unclear cases, HMRC weighs a set of signs it calls the badges of trade. Its Business Income Manual lists nine. No single badge decides the answer, and some may point one way and some the other.

• Profit-seeking motive: did you buy with the aim of selling at a profit?
• The number of transactions: regular, repeated sales point towards trading.
• The nature of the asset: is it something people usually buy to sell rather than to use?
• Existence of similar trading transactions or interests: is it linked to a trade you already run?
• Changes to the asset: did you repair, improve or repackage it to sell it?
• The way the sale was carried out: did you sell the way a business would?
• The source of finance: did you borrow money you could only repay by selling?
• Interval of time between purchase and sale: a short gap points towards trading.
• Method of acquisition: did you buy it, rather than inherit it or receive it as a gift?

Tip For a reselling or dropshipping business most of these point the same way: you buy only to sell, you sell often, and you sell like a shop. Treat it as a business from the start.

How does the £1,000 trading allowance work?

The trading allowance is a tax exemption of up to £1,000 a year on trading income. GOV.UK says that if your gross trading income is £1,000 or less in a tax year (6 April to 5 April), from one or more trades, you may not have to tell HMRC. If it's more than £1,000, you need to tell HMRC, usually by registering for Self Assessment.

Gross means before any expenses. If you sell £1,500 of goods that cost you £1,200, your profit is £300, but your gross trading income is still over £1,000.

Above £1,000 you can either deduct the allowance or deduct your actual expenses, not both. If your real costs are more than £1,000, deducting them gives the bigger deduction.

Does eBay report my sales to HMRC?

Yes, if you're over the reporting thresholds. Digital platform reporting rules started in the UK on 1 January 2024. Platforms such as eBay collect seller information for each calendar year and send it to HMRC by the following January. They must give you a copy of what they report.

GOV.UK says you won't be reported if you make fewer than 30 sales of goods in a calendar year and receive less than 2,000 euros (about £1,700). In practice, around 30 sales or around €2,000 in a year puts you in scope. Check GOV.UK for the current wording.

The reporting thresholds and the tax rules are separate. Selling personal things above the thresholds doesn't mean you owe tax. Trading below them can still mean you have to tell HMRC, because the trading allowance is £1,000 of gross income.

What changes when you're a business seller?

Business sellers have legal duties to consumers that private sellers don't. eBay's business seller policy says you must:

• Show full contact details for the business.
• Give clear prices, including postage and any taxes, and a VAT number if your online sales are subject to VAT.
• Have a returns policy that says how long buyers have to return items for a full refund.
• Tell buyers they have 14 days to withdraw from the purchase under the Consumer Contracts Regulations.
• Accept faulty items within 30 days for a full refund under the Consumer Rights Act 2015.
• Not charge restocking fees.

Watch out UK private sellers currently pay no final value fees on most eBay categories, and buyers pay a Buyer Protection fee on their listings instead. Choosing private to save fees when you're really trading goes against eBay's business seller policy, and eBay can remove listings, restrict or suspend accounts that break it.

How to switch to an eBay business account

eBay says that once you upgrade, you can't go back to a personal account. If you're opening a new account, choose Create a business account on the registration page instead.

Registering with eBay is separate from registering with HMRC. If you're trading and over the allowance, register for Self Assessment as a sole trader or set up a company. If you're unsure which, check with an accountant.

1. Go to Account settings in My eBay.
2. Select Personal information.
3. Select Edit next to Account type.
4. Select Confirm to upgrade to a business account.
5. Choose your business structure and enter your business details, including your name, contact information and returns policy.