Selling secondhand goods on online marketplaces has become a force to be reckoned with, allowing people to make extra income as resellers in what’s known as a "side hustle".
But regulations in the UK have compelled leading firms such as Depop and Vinted to increase their sharing and collection of transaction details with tax authorities, causing panic for active resellers.
Digital platforms will now routinely report the income sellers are making through their site via the sale of goods such as second-hand clothes or handmade items.
The threshold for earnings is set above £1,000 a year. Online sellers above this level must register as self-employed and file a self-assessment tax return at the end of the financial year.
HMRC [His Majesty's Revenue and Customs - the national taxing authority of the UK] stated: "These new rules will support our work to help online sellers get their tax right first time. They will also help us detect any deliberate non-compliance, ensuring a level playing field for all taxpayers."
But is this change as alarming for resellers as it sounds?
The impact of the tax clampdown on UK resellers
GlobalData apparel analyst Chloe Collins explains that these rules are not new. The difference is in the level of data collected by resale companies and how this will be communicated to HMRC, which may mean that existing rules are more strongly enforced.
She confirms that “the majority of resellers will not be affected, as the £1,000 tax-free limit only applies to those that are buying items with the intent to sell them for more money. Resellers who are purely selling their old clothes, and usually selling them for less than they originally bought them for, will not face any taxes.
“Only a small percentage of resellers will – mainly those that buy limited-edition or high-demand designer items knowing they will have higher resale values due to their scarcity. Therefore, this change will not have a large impact on the apparel resale market.”
Confusion around the rules might initially alarm some genuine sellers using resale sites to sell their old, unwanted clothes who are either selling luxury goods or in large volumes. coming close to the £1,000 threshold.
The outlook for resale platforms
Collins affirms that resale sites should clarify the rules in their marketing and on their websites to curb these concerns and ensure sellers are not deterred.
2023 saw the collapse of resale platforms Cudoni and Dotte, sounding alarm bells for other marketplaces.
While GlobalData predicts that the global apparel resale market will continue to thrive in the coming years, growing 85.5% between 2022 and 2026 to reach $338.3bn, resale companies must prioritise finding profitable revenue streams to continue competing within the market.
