Record Keeping and Tax for Independent Sellers

If you are selling regularly, you are running a business, and businesses keep records. This is not exciting and it is not optional. The good news is that a spreadsheet and ten minutes a week covers almost everyone, and doing it from the start is far easier than reconstructing a year at the deadline.

What to record

Four columns: date, what sold, what you were paid, what it cost you. That is it. Do it weekly while you remember, because trying to remember in March what a March parcel weighed is impossible. Marketplace payout records give you most of the income side, so your job is mostly the costs.

What counts as a cost

The things you buy to sell: stock, packaging, postage, marketplace fees. The things you buy to run it: a phone stand, a lamp, a set of scales, part of your phone bill if you use it for this. Keep receipts. A photograph of a receipt in a dated folder is a receipt. Do not guess at year end, because guessed expenses are the ones that get questioned.

When it stops being a hobby

There is a threshold in most places above which trading income must be declared, and it is lower than people assume. If you are selling every week with the intention of making money, you are trading, whatever the amount. Look up your local threshold rather than taking anyone's word for it, including mine. If you are near it, register. Registering early costs nothing. Registering late costs penalties.

Keep it separate

A separate bank account for selling income and selling costs makes your records almost automatic, because the statement is the ledger. It also keeps your selling money away from your everyday money, which makes it far easier to see whether this is actually earning, and that matters when you are working out what your work is worth.

Privacy and paperwork

Tax records are private records. Nobody is publishing them. If you use a working name, your real name still goes on your tax return, and that is normal and expected for every independent trader. It does not put your name in front of buyers.

Open a spreadsheet today, four columns, and enter your last five sales. It takes five minutes and you will never have to do the horrible version of this job.