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Selling Personal Possessions on eBay and the Subject of Income Tax

If you’re anything like me you probably buy personal items, sling the receipts, then years later you have drawers and cupboards packed with unwanted clothes and collectibles, books and toys, jewellery and much more besides.

There comes a day when you decide to downsize, you want to make room for more items you probably won’t ever use, and in twenty years time you decide to sell those products and get your money back to spend on more unnecessary clutter.

So you decide to sell all your unwanted personal goods on eBay which is easy and very enjoyable too.

And that’s where the big problem lies!  When you get round to selling personal goods alongside business goods it’s imperative you keep income and overheads separate for both product types.         I take it you do realise the taxman might want some of your income from personal sales, especially if you make more than those items originally cost you.   Basically he or she wants to know how much you paid for those items and how much they sold for, unless, like most people, you have no idea how much your personal acquisitions cost you twenty years ago?  Did you keep the receipts, or did you bin them thinking you’d never sell these items anyway?

It’s years since I first encountered the problem of distinguishing between income on personal goods and income on business goods, the latter being items purchased specifically to resell.  That was in the early 1970s, when I was buying and selling postcards at flea markets, at the same time growing a postcard collection that amounted to hundreds of thousands of views of the entire north east of England. 

With so many items in my own collection and nowhere to store them, I decided to narrow my collecting area down to County Durham only, and get rid of all those Northumberland, Cumbrian and Yorkshire views.  I’d sell these items at flea markets and collectors’ fairs and at that time I knew exactly how much I’d paid for my own collection because most postcards, then and now, are pencil priced on the back.  But I had no receipts as such, primarily because most traders at boot sales and flea markets are moonlighting and don't like giving receipts.  Not those I knew at any rate. 

So I phoned the taxman and asked how to address the problem of making possible profits on my own collection alongside items purchased specifically to resell.

The taxman told me the best way to approach the situation is to keep separate records for private and business goods and to calculate how much I actually paid, where known, for personal goods, in my case from those penciled prices on the back of postcards and paper ephemera.  At end of year, he told me, I should enter cost of personal and business stock separately as outgoings in my tax returns.  Keep proceeds from sales in individual accounts and list them separately on tax returns as earned income. 

That was easy, and it worked, until recently when I decided I might one day want to part with other items I’ve collected which don’t have prices pencilled on the back, the reason being I bought them from flea market sellers (you know, they don’t give receipts) and most were the result of haggling on big bundle lots, all unpriced. 

I have literally thousands of postcards in my own collection including some I’m not fussed about keeping.  But I have no idea how much they are worth, so, unlike those earlier times I can’t calculate value to enter a realistic price for stock on my tax returns.

So I phoned my accountant and asked what other people do when they sell the children’s cast-offs and bikes, unwanted furniture, old books and paintings, as part of a traditional business, in a second hand shop for example, or on eBay.

He said the only way to do it is to make a good guess at how much those items originally cost and keep a list of every item being sold alongside your guesstimate purchase price.   Sell those items on eBay and keep a note of which items sold and how much they made.  Yes, I know, it’s starting to look time-consuming and messy but it will keep you in the taxman’s good books and that’s something we should all be doing anyway.  At tax time you should enter takings from personal goods separately from traditional business profits and enter the prices you paid for those items as separate outgoings.  Above all, my accountant says, keep the list somewhere safe in case the taxman wants to see it later and if you have an accountant give him or her a copy when you submit your annual accounts.

There may also be allowances under capital gains rules for sales of personal items which are best discussed with your accountant or local tax office.