Income Tax

Am I liable to tax on the sales I make?

If you are just selling some unwanted items that have been lying around in the attic, the answer is probably no. In order to pay tax on the goods you sell, you either have to be trading or make a capital gain. If you are trading you will be self-employed.

Am I trading?

Essentially ‘trade’ is a two-way relationship between a trader and a customer – where the trader provides goods or services to the customer for reward on a commercial basis. In addition, the courts have identified ‘nine indicators or ‘badges’ to help decide whether a trade exists or not. It is not always easy to decide even using these ‘badges’ because a trade may exist even if only one or two of the indicators are present.

Once you have read this guide and examples and you still don’t know whether you are trading, please contact us so we can help.

You are trading if you:

• sell goods you have bought for resale
• make items yourself and sell them, intending to make a profit
• sell (or buy) goods on behalf of others for financial gain (for example on commission)
• provide a service and receive payment (whether in cash or in kind).

If you are trading you may have to pay Income Tax and National Insurance Contributions (NICs) and VAT, and we will treat you as self-employed in that trade.

But you are not trading if you:

• sell occasional, unwanted personal items through Internet auctions or classified advertisements
• attend a car boot sale once a year to sell unwanted household items.

If you are not liable to Income Tax you may still be liable to other taxes.