Are you selling on eBay? Find out when do I need a business account
In a world of upcycling and turning hobbies into money making schemes, an increasing number of people are using the internet to make some extra money either selling surplus items or setting up a ‘microbusiness’ selling anything from vintage tools and 90’s console games to personalised dummy clips and crochet Star Wars characters.
But at what point does your hobby business and/or second-hand selling require you to take it more seriously; filing tax returns, keeping records and switching from a personal account to a business account?
When do I have to pay tax on eBay selling?
The government gives you an additional personal tax-free leeway of £1,000 that you can make through eBay or social media selling, which is enough to cover you selling small inexpensive items or items you no longer use such as baby clothes, DVDs, toys and small furniture items.
It won’t be sufficient if you are selling larger items or buying in bulk to sell on. It is at that point you are required by law to declare your earnings, and penalties for not declaring eBay earnings over this amount can be steep.
When do I need a business account for selling on eBay?
A lot of banks, challenger banks and e-money issuers will have terms and conditions that state a personal account cannot be used for business purposes and will use the government’s legislation as a guideline for defining what constitutes personal and business use for accounts.
Essentially if you are in a position where you are close to declaring your income from selling on eBay, you will need to start looking at opening a business account.
Why use a separate account for eBay selling?
It can be hard to keep track of all your funds, and whether you’re selling over or under the threshold you might want to consider a separate account anyway, even if it’s a personal account.
Firstly, you will need to prove you are earning under the tax threshold if you get asked to by HMRC and having the funds ringfenced in a separate account will make this much easier.
Secondly, it means you can set this money to one side in a ‘jam jar’ style approach to spend on something specific or meaningful as opposed to frittering it away.
Lastly, if you do decide to go for a business account, be sure to choose one specifically aimed at sole traders – many high street banks expect to see evidence or earnings and sales forecasts which you are unlikely to have.
Arro Money for eBay sellers
Arro Money offer both personal and business accounts. Under the business accounts there is an option to open up a sole trader account, making it an ideal account for those who sell on eBay, or similar sites. In addition to being able to pay money in, you receive a contactless Mastercard, along with a sort code and account number. You can pay into the account from PayPal and pay for postage using card ensuring you are never undercharging.