Decluttering after Christmas? Second hand or side hustle - Deloitte clarifies tax rules for selling unwanted gifts

With the festive season now behind us, people are clearing out their old belongings and making space for new gifts or selling unwanted duplicates. If you are considering listing those items online or donating them to charity, for the vast majority, these activities will not trigger any tax bills.

While digital platforms are now required to report sales data to HMRC if an individual sells at least 30 items or receives proceeds of approximately. £1,700, this measure is primarily aimed at identifying individuals running online businesses, not casual declutterers.

Rachel McEleney, director in Tax Policy at Deloitte UK, said:

“Someone knitting 50 Christmas jumpers and selling them online for over £1,000 should be paying income tax on any profit made, whereas someone selling a similar number of old garments that they originally bought for their own use is unlikely to be running a business. If you are unsure whether your activity amounts to a business, it’s also important to bear in mind that the potentially taxable income is based on profits, not proceeds, so consider whether you have recouped more than you originally spent.

"The good news for most people having a post-Christmas clear out is that HMRC is not interested in those merely decluttering their house and selling their own belongings. Their focus is on people making a profit from running a business, such as crafting items or operating market stalls, as part of their 'Help for Hustles' campaign.”

Key tax takeaways for a Christmas clear out:

• No income tax or capital gains tax is due on most personal sales: If you are selling personal belongings rather than running a business, income tax generally doesn’t apply. Most household items are also exempt from capital gains tax under a 'chattel exemption' if they are worth less than £6,000 individually.
• Boosting charities with Gift Aid: Donating unwanted items to a charity shop can provide a significant boost to their funds, especially if the charity operates a retail Gift Aid scheme. Under these schemes, the charity sells the goods on your behalf and can claim an additional 25% from HMRC on the sale proceeds that you give them if you've made a Gift Aid declaration. Higher-rate taxpayers may also be entitled to further income tax relief.
• Understanding inheritance tax exemptions: If you're giving gifts of value to family or friends, several inheritance tax exemptions can apply:
  • Small gifts exemption: You can give gifts of up to £250 per person per tax year without any Inheritance Tax implications.
  • Annual exemption: Gifts up to £3,000 per year are exempt from Inheritance Tax. This allowance can be carried forward for one year if unused.
  • Normal expenditure out of income: Gifts of any value can be immediately exempt if they are part of your regular spending pattern and do not negatively impact your lifestyle.
  • Charitable gifts: Gifts to UK registered charities are immediately exempt from inheritance tax.