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Depop Tax Guide

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Everything you need to know to about tax when you are a seller on Depop in the UK.

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Selling second-hand clothes and accessories has gained a lot of attention lately, especially starting from Gen-Z onwards, thanks to the rebirth of the love for vintage and greater attention to the fashion industry's environmental impact. Not to mention that most of us have a wardrobe full of clothes that we don’t use anymore or that we have never even used. In the latest years, online marketplaces, like Depop, have come to our rescue.

Depop is an online marketplace that allows you to sell old garments as well as new ones. Even if it’s mainly used to declutter closets or sell brand-new products, you can also sell other things on the platform, such as books, jewelry, art, and records.

Founded in 2011, it counts over 30 million users, mainly zoomers, and 1.8 million sellers globally. In 2021, Depop has been acquired by Etsy for over $1,63 billion, which caused an increase in its clientele.

Everyone is crazy about this opportunity as it’s an easy way to earn some money. However, if you’re one of the lucky ones that sell loads on Depop or you’re thinking of building a proper shop on it, you’ll also need to take care of the boring bits that come with it. Figuring this out is not straightforward, which is why we've put together this guide.

How to become a Depop seller

The process for setting up a profile on Depop is pretty easy. Before starting it, you should have an idea about what kind of products you want to sell on the platform so that you can start selling immediately.

First of all, you need to sign up for Depop. You can do this in two ways, on the Depop app (that you’ll need to download) or on depop.com. Either way, you’ll then need to provide a phone number and an email address.

After this, you’ll choose your username and a bio for your profile if you have already something in mind. Don’t worry, you can always add this bit later! At this point, you’ll also have to choose your password and select your profile picture.

Lastly, you’ll need to set up how your customers will pay you.

Note that, at the moment, you’ll need a PayPal account to sell on Depop. So make sure to have a verified PayPal account to connect to your Depop account. However, the company is currently working on increasing payment methods by adding Apple Pay, Google Pay, and credit/debit cards, which are already available to some users but not to everyone.

You’re now ready to start listing your items!

How to become a Depop top seller

To become a Depop top seller, you’ll need to meet certain criteria decided by the company.

Specifically, for 4 straight months you need to:

  • Hit a monthly sales target: this means selling 50+ items at an average price of £15+ or earning a total of £2,000 in sales before fees.
  • Customer reviews: you need to achieve an average rating of at least 4.5 and make sure no infringements are linked to your account.
  • Shipping time: you need to keep your shipping time within 3 days on average, so buyers get their package within an average of 10 days.

Moreover, to keep this status, during the next four-month periods, you’ll need to increase your monthly sales target to 200+ items at an average price of £15+ or earn a total of £8,000+ in sales before fees. Customer reviews and shipping time stays unchanged.

Once you’ve reached this status, Depop will allow you into their invite-only program that rewards strong sellers who always make their buyers feel special. With this, you’ll receive some benefits, that we listed here:

  • Blue tick status: this signals to customers that you’re a trusted seller and an integral member of the community.
  • Private community forum: where you can connect with other Top Sellers and the Depop team.
  • Depop Top Seller team: a dedicated team at Depop who focuses on supporting the growth of your business.
  • Access to exclusive data: Depop will grant you access to a monthly report of your key shop activity, with monthly trends and inventory insights provided by Depop analysts.
  • Extra consideration for promotional opportunities on the platform
  • Exclusive Top Seller events

How much can I make as a Depop seller?

This mainly depends on how much effort you put into your Depop shop. To give you an idea, an average Depop seller can make between £85-£855 every month. However, according to Business Insider, some sellers managed to earn around $300,000 (£255,995) in a year, with other top sellers making around $10,000 (£8531) per month.

Note that Depop takes 10% of every sale you make, including shipping costs. This will be automatically collected from your connected PayPal account.

Do I need to pay tax? And how do I pay for tax?

The answer is that although you might not see it as a business it technically is, and you might have to pay tax. But, this depends on how much money you make with Depop (and outside Depop).

If you had sales of less than £1,000 a year with Depop you do not need to do anything. HMRC lets you earn £1,000 a year through websites like Depop without worrying about income tax.

If you had sales of more than £1,000 a year with Depop, you need to submit a tax return. This doesn't necessarily mean you need to pay tax. It just means HMRC wants to know a little bit more about your business in case you start earning more in the future.

Specifically, as with any self-made income, you’ll need to pay tax on your income if you make over £12,570 in the tax year.

If you’re selling on Depop on the side then you’ll need to understand paying tax as a side hustle. You can read more about side hustles in our blog post here.

If you’re going full-time seller mode then you’ll need to understand paying tax as self-employed. You can read more about going fully freelance in our blog post here.

As you start out you’re more likely to be a sole trader in which case the bands for tax are:

  • Tax allowance: 0% of earnings (You’ve earned between £0 and £12,570)
  • Basic rate: 20% of earnings (You’ve earned between £12,571 and £50,270)
  • Higher rate: 40% of earnings (You’ve earned between £50,271 and £150,000)
  • Additional rate: 45% of earnings over £150,000

Don't forget that you'll also need to pay National Insurance on your income if you earn over £11,908 in a year.

If you start hitting that higher rate of tax then it’s worth setting up as a limited company. This means you’ll pay corporation tax on your earnings at 19% rather than 40%+ income tax. If you’re on the basic rate it’s worth remaining as a sole trader and avoiding the additional admin and costs of setting up a limited business.

Each year you need to fill out a self-assessment tax return. What you pay is your freelance tax bill minus the expenses of running your business. You can read more on how to complete your self-assessment tax return in this Earnr article.

The usual cut-off date to complete your self-assessment is the 31st of January if you’re doing it online, and the 31st of October if you’re completing the form by post.

What can I expense as a Depop seller?

As a sole trader you'll have various running costs depending on the work you do. You can deduct these costs from your taxable profit as long as they're eligible expenses.

So if you earn £50,000 and you claim £9,000 in expenses, you’d only be taxed on £41,000 for the year.

Note that if your expenses are under £1,000, you can claim the tax-free trading allowance, meaning that you don’t need to keep your receipts, but you won’t be entitled to claim any expenses.

You can read more on what the Government considers expenses here.

As a Depop seller, you might expenses thighs like:

  • Use of your home as an office base, meaning bills, phone usage, postage, etc
  • Depop fees, such as the cost for publishing a listing and the transaction fee that they charge on each of your sales
  • Postage and packaging costs
  • Advertising and photography costs
  • Modeling costs
  • Accountant fees
  • Cost associated with attending shows and event spaces, such as travel costs, lodging (if you need to stay overnight for business reasons), and meals.

Be aware that if you use the same vehicle for traveling for work and for your own personal use then you’ll need to factor this in when any expenses are claimed. If you work out that you use your vehicle 40% of the time for personal use, then you would need to reduce any relevant vehicle running expenses by 40%. The same happens if you use your home as an office base, you should calculate which portion of your bills or phone usage can be counted as running expenses.

How can Earnr help?

Earnr makes self-employed bookkeeping easy, so that you can spend less time worrying about this kind of stuff and more time growing your business.

You can separate your business transactions from your personal ones, track your expenses and get a real-time tax estimate so you know whether or not you need to submit a tax return.

Check it out here.

Other articles

Looking for more? Why not check out some of the other articles we've written to help you with your Depop business.

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