The Great Reselling Swindle?
We all want to earn loads of money! I know that I’m interested in adding as many channels as possible to my earning potential. One route I’ve not taken yet is reselling and I’ll explain why in this blog post
Part 1 – Stock for Reselling
If you do match betting then you are used to the concept to locking in a bit of cash to make a profit. Buying stock for reselling is very similar to this. You are locking in the £10 you spent buying an item until the item sells. You hope the item sells for more than you bought them for. Most people don’t only buy one item so you have to expect you could have quite a bit of cash invested in your stock which you wont see back until it sells. This can mean your cash could be tied up when it could be earning somewhere else.
Part 2 – Profit from Reselling
Its important that you make a profit! You’ll often see re-seller videos on YouTube and you’ll see sellers mention that they bought for £10, they will sell for £20 + postage. This looks excellent! With postage being paid separately the seller is making £10 profit and doubling their money! What is not to like? They might have 10 items they are doing this with…£100 profit! Doubling their money on all the items. Quids In!
It Sound So Easy
It really does. You watch people’s videos and they talk about their hauls and you can be amazed. I know I am. Then I look through the rest of their videos and their blog posts and I don’t see any follow up. We don’t see when an item sells nor do we get to see what the final selling price is. There are multiple places to sell items and for this blog I’m going to use eBay as the example.
The Costs of eBay
When they buy an item for £10 and sell it for £20 + postage/packing, it is very easy to assume you make a lovely £10 profit! Brilliant! Double money! However, this is not the case. You get charged for using eBay and you also get charged for accepting a PayPal payment. Before you know it your £10 ‘profit’ has been decimated!
Hang on! We’ve lost nearly 40% of the profit in eBay fees! So far your reselling is making 62.5% profit which really isn’t bad at all!
Wait a minute Mr. Taxman
If you buy anything with the intention to resell it for a profit then you have to register with HMRC. Once you register with them then you are able to complete a self-assessment tax form. If you have a day-job that uses your tax-free allowance then ALL of your eBay income will attract tax. Tax could be 20% of your taxable income, on top of your tax you could also have to pay National Insurance Contributions. If we ignore NIC (just because it is easier) then your 62.5% profit then drops down to 42% profit.
There has been a court case where HMRC jailed someone when they sold items and didn’t pay tax – 500000 items sold on ebay and no tax paid!
Helpfully there is a couple of ‘tests’ you can do to help identify whether you should be paying tax on items.
- You intended to make a profit rather than sell items for enjoyment or to raise emergency funds.
- There are a number of similar transactions in a short period of time.
- You cannot prove the goods gave you a “pride of possession” before being sold.
- The online transactions replicate an existing type of business, such as a clothing retailer.
- Items are modified before selling them to achieve a greater profit.
- Items are sold at a fixed price in the same way as a shop or auction house.
- Money was borrowed to buy an item that could only be repaid upon selling the item.
- Assets are sold on quickly after acquisition.
- Items were bought to sell rather than received as a gift or inheritance.
The Return of the Returns!
From your £10 item you will get about £4.20 (blaze it) in profit. 40% profit isn’t bad for a small business. However, if you trade on eBay then you will encounter the worst of all the eBay buyers, the returner! Someone gets your item, then decides they don’t want it or that it isn’t what they thought it was. But, they’ve only done this AFTER they have opened the item.
Even if the customer returns the item to you for free, you still now have a ‘used’ item which wont be worth the same as a new one. You can put it back on ebay but you will have another set of ebay (and paypal fees) that need paying. Of course you get less money for used items, so your £10 outlay on the item may only get you £15 back on ebay. Then you have to pay out your fees again!
The Final Word
Reselling is not really a swindle, but like a lot of money making schemes that people share on the internet, you often only get half of the truth as the whole truth isn’t always as appealing and certainly doesn’t give you the headline numbers that you want to entice people back to your blog/website/vlog/etc.
I’m certainly not saying that you can’t make money from reselling. There are lots of bloggers who make a success of reselling and even more people who do reselling and DON’T blog about it – Can you imagine such a thing??!!! 😀
My advice to everyone is do your research before getting into Reselling. If you already have a full-time job then you will need to register with HMRC and submit a self-assessment. You may find this is too involved for you or that you also don’t want to start waving at the tax man.
It is also worth remembering that items that you’ve owned and are selling to clear out (not items you’ve bought with the intention to sell for a profit) are not taxable at all! We all have tons of stuff in our homes which we perhaps don’t need anymore. If you want to start your selling journey then start there and see how you go!