UK tax authorities have issued a clear warning to households attempting to reduce their income tax bills by claiming losses on personal items sold online. The alert from HM Revenue and Customs (HMRC) specifically addresses a common misunderstanding about the rules for platforms like eBay.
The Taxpayer's Query That Sparked the Clarification
The warning emerged from a direct exchange on social media platform X, formerly Twitter, in the run-up to Christmas. One taxpayer revealed they had sold a collection of personal belongings acquired over the previous five years, making an overall loss of approximately £3,000 compared to the original purchase prices.
They asked HMRC directly if this financial loss could be "offset against my income tax", adding that if it were possible, they had "loads of stuff" they would be happy to sell. The individual highlighted their significant income tax payments as motivation for the query.
HMRC's Firm Response on Tax Rules
HMRC's reply was unequivocal. A representative stated: "You can’t offset losses from selling personal belongings against your UK income tax." The authority explained the fundamental principle that capital losses can generally only be used to offset capital gains, not income from employment or other sources.
This prompted a follow-up question from the user, who asked why eBay sales could be liable for income tax in the first place. HMRC directed them to official online guidance to check their specific obligations.
Capital Gains Tax: The Real Rules for Personal Possessions
The discussion then turned to a hypothetical example to test the boundaries of the rules. The X user asked about buying a picture for £1,000 at a car boot sale, later discovering it was worth £10,000 and selling it. They also queried the reverse scenario involving a loss.
HMRC provided a detailed breakdown:
- If you buy an item for £1,000 and sell it later for £10,000, and it is not exempt, the £9,000 gain is subject to Capital Gains Tax (CGT).
- If you sell it for less than you paid, that creates a capital loss. This loss can only offset other capital gains, not income tax.
- Most personal possessions worth £6,000 or less are exempt from CGT altogether. Rules apply to items above this threshold.
- Critically, losses on exempt items cannot be claimed at all.
The tax office further clarified that you only need to report a gain on your tax return if the disposal proceeds were more than £6,000 and the item is not exempt. The 'proceeds' usually means the sale price, but market value is used if you give the item away or sell it to a connected person.
This public clarification serves as a timely reminder for the many people selling items online in the new year. The key takeaway is that selling your own used possessions, even at a significant loss, does not provide a mechanism to reduce your annual income tax liability. The rules for capital gains and losses are separate and strictly applied.
