Whether you owe tax on your sales depends mostly on one question: are you trading, or just selling your stuff? There's no single rule. HMRC looks at a set of signs called the badges of trade. This guide explains each one with an example from selling apps. The Vinted tax checker asks the plain-English version of this question for you.
What the badges of trade are
The badges of trade come from how the courts have decided past cases. HMRC sets them out in its Business Income Manual (BIM20205). They're signs, not a checklist: HMRC weighs them together and looks at the whole picture.
The nine badges, with examples
1. Profit-seeking motive
Did you buy the item intending to sell it for more? An intention to make a profit supports trading, but on its own doesn't prove it.
On Vinted: buying a jacket at a car boot sale because you know it resells for more points to trading. Selling a coat you bought to wear doesn't.
2. The number of transactions
Systematic, repeated sales support trading. A one-off sale usually doesn't.
On Vinted: sourcing and listing new stock every week looks like trading. A big one-off wardrobe clear-out doesn't, even if it's 100 items.
3. The nature of the asset
Some things can only really be sold for profit, while others give you personal use or enjoyment.
On Vinted: 50 of the same trainers in different sizes are very likely to be for selling. One pair you wore is personal.
4. Similar trading transactions or interests
Sales that are similar to an existing trade are more likely to be trading themselves.
On Vinted: if you already run a clothing stall, similar sales online are likely to be part of that trade.
5. Changes to the asset
Did you repair, alter or improve something to make it easier to sell or worth more?
On Vinted: upcycling charity-shop jeans into shorts to sell points to trading.
6. The way the sale was carried out
Did you sell in the way a business would, or because you needed to?
On Vinted: professional photos, branded packaging and a shop-style profile look like trading. A quick listing to clear space doesn't.
7. The source of finance
Did you borrow money to buy something that can only be repaid by selling it?
Example: buying wholesale stock on a credit card, planning to clear the balance from sales, points to trading.
8. Time between buying and selling
Selling soon after buying suggests trading. Holding something for years, or using it, suggests not.
On Vinted: relisting an item a week after buying it points to trading. Selling a dress you've owned for three years doesn't.
9. How you got it
Things you inherited or were given are less likely to be the subject of a trade.
On Vinted: selling your late grandmother's handbags is unlikely to be trading on its own.
Putting it together
| Probably not trading | Probably trading |
|---|---|
| Things you bought to use yourself | Things bought to sell on for more |
| Occasional sales, or a one-off clear-out | Regular sourcing and listing |
| Held and used for a long time | Resold soon after buying |
| Inherited or given to you | Altered or upcycled to sell |
| Sold to clear space or raise cash | Sold with a business-like set-up |
Grey areas
- Worn once, sold for more than you paid. Usually still personal, if you bought it to use.
- An occasional flip. One or two profitable resales may not be a trade, but a pattern of them can be.
- A mix of both. Many sellers do both. Only the things you bought or made to sell count as trading, and only those count towards the £1,000.
If HMRC has already written to you, see what to do about an HMRC nudge letter.
Why it matters
If you're trading, the first £1,000 of trading income each tax year is covered by the trading allowance. Over that, you usually need to register as self-employed. If you're not trading, selling your own things is usually untaxed, however many you sell, apart from single items or sets over £6,000.
If you're studying for accountancy exams, HMRC's manual page BIM20205 is the primary source. This guide is a plain-English summary for sellers.