The holidays are around the corner, and who doesn’t love a little extra cash? Selling pre-loved clothes and household items is not only a fantastic way to declutter but can also be a source of tax-free income – if you know the rules. We compare tax rules for second-hand sales in two markets, the UK and Spain.
Can you make tax-free earnings on second-hand sites?
Selling and buying second-hand items on platforms has exploded in recent years. But it can get confusing when it comes to paying tax on sold items. According to one site, Vinted, in most cases, you can keep all your earnings. Why? Because you’re selling personal belongings, not running a business. A great example of how you could benefit is to sell items in bundles, for example, when you do a clear-out or declutter and you want your items to go to a good home but also want to make some extra cash.
UK tax rules: What you need to know
The UK tax authority HMRC provides clear guidelines on selling personal items. Here’s the key takeaway:
- Trading allowance: You can earn up to £1,000 from selling anything (not just clothes) before needing to declare it as income. This is your ‘Trading Allowance’.
- No profit, no tax: As long as you’re selling items for less than you originally paid, you won’t be taxed on any profit (because there isn’t any!).
- Capital gains tax: This only applies if you sell a single item for more than £6,000 and make a profit.
Spain tax rules: a similar story
The Spanish tax authorities have similar rules:
While sales made on Vinted, for example, are generally not taxable, you need to submit Form DAC7 if you’re eligible. For example, all people who make at least 30 sales or earn more than €2000 on Vinted in a calendar year. Meeting these requirements does not mean that you have to pay taxes on the sales you have made.
Just like in the UK, personal belongings are exempt. Selling your own used clothes generally isn’t considered a taxable activity.
Tips to stay tax-free:
- Keep it personal: Stick to selling your own used clothes and accessories.
- Reasonable pricing: Price items fairly, reflecting their used condition. Avoid inflated prices that might flag you as a trader.
- Track your sales: While you likely won’t need them, keep records of your sales just in case.
Where to find official information:
- UK: Visit the HMRC website (www.gov.uk/hmrc) for detailed guidance on the Trading Allowance and Capital Gains Tax.
- Spain: Check the website of the Agencia Tributaria (www.agenciatributaria.es) for information on tax regulations related to selling second-hand goods.
With a little know-how, you can turn your wardrobe into a tax-free cash machine this holiday season.
Disclaimer: This article provides general information and should not be considered professional tax advice. If you have specific questions about your tax obligations, consult with a qualified tax advisor in your respective country.