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Do you owe tax from selling on Depop?

Selling on Depop, as with any other online selling, can be classed as a profit-making business by HMRC.

The important distinction in terms of tax is whether or not you’re selling for profit. If you’re buying or making clothes/products for selling on Depop, for example, you’ll probably have to pay tax on this. If you’re selling old clothes, comparatively, it’s likely you won’t owe tax. 

Think about these things if you’re not sure whether or not you’re making business profit:

  1. How much money are you making?
  2. How much time are you spending selling on Depop?
  3. Is it a hobby or is it your main source of income? 
  4. Have you registered as self-employed?

I’m creating/buying products to sell

If you’re creating or buying things to sell, that leans towards business profit. HMRC defines this as a lack of “pride of possession”, which basically means that it holds no value to you other than as an item for trade.  

However, you are covered tax-free by a few things. 

  1. The Trading Allowance

The Trading Allowance enables you to make £1000 profit tax-free which can be useful if you’re working full-time alongside your Depop gig. 

  1. The Personal Allowance

If you don’t work and you sell on Depop as a hobby business, you don’t pay Income Tax on profit less than £12,500 each tax year. 

I’m selling old things on Depop

If you’re selling your old clothes on Depop, the likelihood is that you won’t have to pay tax on this. If you buy some jeans for £90, for example, and sell them years later for £45 on Depop, you’re not turning over a profit so you won’t pay tax on this. 

The frequency that you sell is also important to HMRC. If you sell often and consistently throughout the year, this may be viewed as trading – and you might owe tax. But if you just list items on Depop when you need some emergency cash at the end of the month, this will be seen as personal earnings.

How will HMRC know that I’m selling on Depop?

Since September 2016, HMRC has had access to sites like Paypal and can request extensive information from online auction/selling platforms. This was following a recorded 870,000 sellers in the UK failing to do a Self Assessment in 2016. 

So if you’re making profits and not declaring it, the chances are that HMRC will find out. 

How to pay tax?

Paying your taxes is pretty simple, even though it may seem complicated if you’re doing it yourself for the first time. 

  • Record all of your Depop sales in the tax year on a spreadsheet
  • Deduct any business expenses
  • Register for Self Assessment online by 5th October – this declares your earnings to HMRC
  • Pay your tax return by 31st January 

What can I expense if I’m selling on Depop?

  • Listing fees
  • Postage and courier services
  • Marketing costs
  • Photography equipment (e.g. camera, tripod etc.)
  • Office space hire
  • Modelling costs
  • Mileage and travel expenses
  • Craft materials 

This list isn’t exhaustive though, so just make sure that you keep a record of everything you spend because you may be able to deduct it from your tax bill.

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