Vinted Tax Rules

Selling products on Vinted, a popular online platform for second-hand clothing, accessories, and other items, has become a common way for individuals to earn extra money in the UK. However, like with all forms of income, it’s essential to understand the tax rules that apply to your sales to avoid any penalties or issues with HMRC (Her Majesty’s Revenue and Customs). Whether you’re selling old clothes to declutter or running a small business, this detailed guide will explain the tax rules surrounding selling products on Vinted.

1. Do You Have to Pay Tax on Vinted Sales?

The main question most Vinted sellers ask is: "Do I need to pay tax on the money I make?" The answer depends on whether you’re selling as a hobby or operating as a business. Here’s a breakdown of how HMRC categorises Vinted sellers:

a. Casual Sellers

If you are selling personal items that you no longer need, like old clothes or accessories that you originally purchased for personal use, you do not need to pay tax on the proceeds. This is considered a personal transaction, and HMRC doesn’t tax casual, non-business sales.

However, if you start selling items regularly or are buying items specifically to resell, HMRC may classify you as a business, which would mean your income is taxable.

b. Business Sellers

If you are regularly selling items with the intention of making a profit (such as buying stock to sell on Vinted), HMRC considers you to be trading as a business. In this case, you are required to register as self-employed and pay tax on your profits through Self Assessment.

Signs that you’re a business seller:

• Buying to Sell: If you purchase items specifically for resale.

• Regular Sales: If you sell items frequently or in bulk.

• Profit Motive: If your primary aim is to make a profit from your sales.

If these apply to you, HMRC will likely treat you as a business, and you’ll need to follow the tax rules accordingly.

2. The Trading Allowance: £1,000 Tax-Free Income

The UK government provides a trading allowance of £1,000 per year. This means you can earn up to £1,000 in income from casual sales on platforms like Vinted without having to declare it to HMRC or pay tax.

If your total sales for the year are under £1,000, you won’t need to worry about filing a tax return or paying tax on those earnings. However, if your sales exceed this threshold, you will need to declare the income to HMRC, even if you are not making a profit.

3. When to Register as Self-Employed

If you are making more than £1,000 from selling on Vinted or if your activity is considered a business, you must register as self-employed with HMRC and complete a Self Assessment tax return each year.

a. How to Register as Self-Employed

• You can register as self-employed online through the HMRC website.

• Once registered, you’ll need to file a Self Assessment tax return annually, typically by 31 January.

• You will be responsible for paying both Income Tax and National Insurance Contributions on your profits.

b. When is the Deadline?

The deadline for registering as self-employed is 5 October following the end of the tax year in which you started trading. You must also file your Self Assessment tax return and pay any tax owed by 31 January each year.

4. Income Tax and National Insurance Contributions

As a self-employed seller on Vinted, you will be taxed on your profits rather than your total income. Here’s how Income Tax and National Insurance Contributions (NICs) work:

a. Income Tax Rates (2023/24):

• 0% on income up to £12,570 (your Personal Allowance)

• 20% on income between £12,571 and £50,270

• 40% on income between £50,271 and £125,140

• 45% on income above £125,140

b. National Insurance Contributions (NICs):

• Class 2 NICs: Payable if your profits exceed £12,570 a year. The rate is £3.45 per week.

• Class 4 NICs: Payable on profits between £12,570 and £50,270 at a rate of 10.25%, and 3.25% on profits over £50,270.

5. Allowable Expenses for Vinted Sellers

If you’re operating as a business, you can deduct allowable expenses from your income to reduce your taxable profit. Here are some common allowable expenses for Vinted sellers:

• Cost of Goods Sold: The cost of items you buy specifically for resale can be deducted.

• Postage and Packaging: The cost of sending items to buyers and the packaging materials used.

• Platform Fees: Any fees charged by Vinted, such as commission or listing fees, are deductible.

• Mileage: If you travel to collect items or deliver packages, you can claim mileage expenses (currently 45p per mile for the first 10,000 miles).

• Home Office: If you use part of your home for your Vinted business (such as a storage area or office), you can claim a portion of your rent, utilities, and internet costs.

6. Record-Keeping Requirements

HMRC requires you to keep accurate records of your sales, expenses, and any other financial transactions. These records should be kept for at least 5 years from the submission deadline of your Self Assessment tax return.

a. What Records Should You Keep?

• Sales receipts or invoices

• Proof of postage and packaging costs

• Copies of expenses (such as mileage records, platform fees, etc.)

• Bank statements showing income and payments

Maintaining good records is essential in case HMRC decides to review or audit your finances.

7. VAT and Vinted Sales

Most small Vinted sellers won’t need to worry about Value Added Tax (VAT) unless your total turnover exceeds the VAT registration threshold, which is currently £85,000 in a 12-month period.

If your Vinted sales push you over this threshold, you must register for VAT and charge VAT on your sales. This also means you’ll need to submit regular VAT returns and pay VAT to HMRC.

a. Do I Have to Register for VAT?

If your Vinted sales are under £85,000 in a 12-month period, you don’t need to register for VAT. However, if you are VAT-registered, you’ll need to charge VAT on the items you sell (if they’re VAT-applicable) and submit regular VAT returns.

8. What Happens if You Don’t Declare Income?

Failing to declare income from Vinted sales when required can lead to significant penalties. HMRC can issue fines, interest on unpaid taxes, and even open a tax investigation into your financial activities.

a. Penalties for Non-Compliance

• If HMRC finds that you have underreported your income or failed to pay tax, they can impose penalties of up to 100% of the tax due.

• In cases of deliberate fraud, penalties can be even higher, and HMRC may take legal action.

To avoid these penalties, it’s crucial to ensure you declare all income from Vinted sales and pay the appropriate taxes.

9. Capital Gains Tax on High-Value Items

If you sell high-value personal assets such as antiques, jewellery, or collectibles on Vinted, you may also be liable for Capital Gains Tax (CGT). However, there is an annual CGT exemption, which allows you to make up to £6,000 in capital gains (profits from selling assets) before you owe any tax.

If you regularly sell high-value items, it’s worth keeping detailed records of purchase prices and sales figures to calculate any capital gains.

10. Key Takeaways

• Casual sellers who sell personal items they no longer need generally don’t have to pay tax on their sales.

• If you’re selling regularly or with the intent to make a profit, you’ll likely be considered a business and must register as self-employed.

• The trading allowance allows you to earn up to £1,000 tax-free from Vinted sales each year.

• Business sellers must file a Self Assessment tax return and pay Income Tax and National Insurance on their profits.

• Keep detailed records of all sales, expenses, and financial transactions.

• VAT registration is required if your turnover exceeds £85,000 a year.

• Failure to declare income or pay taxes can result in penalties, interest, and HMRC investigations.

By understanding the tax rules for selling on Vinted, you can ensure that your activity remains compliant with HMRC regulations and avoid costly penalties. Always consult a tax professional if you are unsure about your obligations, especially if your Vinted selling has grown into a regular source of income.