Do I Pay Tax on Items I Sell for Less Than I Paid for Them?

You just sold a jacket on Vinted for £18. You bought it four years ago for £65. For a moment you wonder: do I need to tell HMRC about this? Then you wonder whether the answer changes if you've sold a lot of things this year at a similar loss.

The short answer is almost certainly no. But the fuller answer depends on whether what you're doing counts as personal disposal or trading, because those two scenarios work very differently.

Personal Items Sold at a Loss

If you bought something for personal use and you're now selling it for less than you paid, you've made a loss on a personal possession. There is nothing to tax. Capital Gains Tax only applies to gains. If there's no gain, there's no CGT. Income tax only applies to trading profits. If you're not trading, there's no trading profit.

This covers the vast majority of second-hand selling on Vinted and eBay. Most people sell things for less than they paid. Clothes depreciate almost immediately. Electronics lose value quickly. Furniture rarely sells for what it cost new. None of that creates a tax liability.

The one scenario where personal possessions can attract CGT is if you sell a single item for more than £6,000 and make a gain on it. Even then, you'd need your total gains across all disposals in the year to exceed the annual Capital Gains Tax allowance of £3,000 before any tax was actually due. For most second-hand sellers on Vinted and eBay this is not a realistic concern. It would apply to selling an antique, a piece of jewellery or a collectable that has significantly increased in value since you bought it. A wardrobe clearout does not trigger CGT.

Trading Stock Sold at a Loss

If you're buying items specifically to resell them, you're trading. Selling some of those items at a loss doesn't mean the loss is invisible for tax purposes. It means the loss reduces your overall trading profit.

Say you're reselling on eBay and across the year you make £800 profit on items that sold well and a £200 loss on items that didn't. Your taxable trading profit is £600. The losses on individual items offset the gains on others. They don't disappear and they don't create a separate tax bill of their own. They simply reduce the net profit figure that income tax and Class 4 NI are calculated on.

What Happens If You Make Losses Across Multiple Years

Carrying a trading loss forward is straightforward in practice. When you file your Self Assessment return for a loss-making year, you declare the net loss on the self-employment pages and tick the box to carry it forward. HMRC records the loss. In the following year, when you file your return and show a profit, the carried-forward loss is deducted automatically from that profit before your tax is calculated.

Say you made a £300 net trading loss in 2025/26 and carried it forward. In 2026/27 you made a £900 trading profit. The carried-forward loss reduces your taxable profit to £600. You pay tax on £600, not £900. You do not need to do anything special to claim the relief other than including the loss on the relevant return and ensuring it is flagged for carry-forward when you file.

One practical point worth noting: losses can only be carried forward against the same trade. If you stop selling on eBay entirely and start a completely different business, the carried-forward loss from the eBay activity may not be usable against the new activity's profits. For most online sellers who continue the same activity year to year, this is not an issue.

The Question Underneath the Question

Selling at a loss is often asked by people who are really asking something slightly different: does making a loss mean HMRC isn't interested in me?

The answer is no. HMRC's interest depends on whether you're trading, not on whether you're making money. If you're buying stock to resell and consistently losing money on it, that pattern of behaviour still looks like trading under the badges of trade test. The losses don't make the activity disappear from HMRC's view.

What losses do mean is that your taxable profit is lower, which is good. They might mean your taxable profit is zero or negative, which means no tax owed in that year. But if your gross income from trading has exceeded £1,000 in a tax year, you still need to register for Self Assessment and report your activity, even if the result of that report is a trading loss rather than a trading profit.

Losses and the Trading Allowance

One question that comes up for sellers in a loss-making year is whether the £1,000 trading allowance still applies. It does, but it works slightly differently when your actual expenses exceed your gross income.

The trading allowance lets you deduct £1,000 from your gross trading income before calculating your taxable profit. If your gross income is £800 and you claim the trading allowance, your taxable profit is zero and there's nothing to declare. If your gross income is £800 and your actual expenses are £1,100, you have a net trading loss of £300 under the actual expenses route. In that scenario claiming actual expenses produces a loss you can carry forward, whereas claiming the trading allowance simply produces a zero taxable profit with nothing to carry forward.

The choice matters if you expect to be more profitable in future years. A carried-forward loss of £300 saves you real tax in the year it's used. A zero result under the trading allowance saves you nothing in future years. If your costs genuinely exceed your income in a loss-making year, actual expenses is almost always the better route.

When You've Sold Mainly at a Loss but Also Made Some Gains

This is common for sellers who mix personal decluttering with occasional profitable resales. You might sell 80 items this year for less than you paid, but five of them sold for significantly more. The 80 losses are irrelevant if those items were personal possessions. The five gains are what matter.

If the five profitable items were also personal possessions that you owned for personal use, the gains are still not taxable unless you sold a single item for more than £6,000 and made a gain on it. If the five profitable items were things you bought specifically to sell for profit, those gains are trading income, and you need to work out your overall trading profit or loss for the year including both the gains and any allowable costs.

The distinction between personal possession and trading stock is the same one that runs through every online selling tax question. Did you buy it to use, or did you buy it to sell? Our quiz on whether your selling counts as trading works through that question if you're not sure which side of the line you're on.

What Records to Keep

If you're doing a personal clearout and selling things at a loss, you don't need elaborate records. It's worth keeping a rough note of what you paid for high-value items in case HMRC ever asks whether a sale was a personal disposal or trading. A screenshot of the original purchase or a bank statement showing what you paid is sufficient.

If you're trading, you need to track both what you paid for items and what you sold them for, regardless of whether each individual item made a profit or a loss. Your net profit or loss across the year is what goes on your Self Assessment return, and you need the records to support that figure. If you're carrying a loss forward, keep those records for the full five years after the filing deadline for the year in which the loss arose, not just the year in which you eventually use it.

The UK Online Seller Tax Template tracks both sides of this: what you paid for stock and what you received when you sold it. The net profit figure it produces is what you'd report on your Self Assessment, with individual losses automatically offsetting individual gains in the calculation.

Get the UK Online Seller Tax Template, £14.99 →