Can you buy stamps now, then sell them for 30% profit?
Stamp prices are going to rocket on 30 April. 1st class letter-sized stamps will rise from 46p to 60p, and 2nd class letter-sized stamps from 36p to 50p. Lots of people have been asking me if they should stock up now in order to sell them for huge profit later. Well… it’s possible, it’s legal, but it may not be that easy.
Here are my 10 key facts everyone needs to know about stocking up and selling stamps:
If they say 1st or 2nd, not a price, they stay valid. As long as stamps indicate the class not the cost, they remain valid after the price hike.
This has been confirmed to us by Royal Mail, which said "we have no plans to change this" and by regulator Ofcom, which said "any future change must be fair and reasonable" (and saying ‘1st class’ isn’t 1st class is very unlikely to be reasonable). So the premise certainly works – more info on this is in my earlier why 1st class stamps stay valid blog post.
Superdrug and Costco are selling them at a discount. Today’s the last day (update: this blog was written on 10 April and this deal has now ended) Superdrug is selling 1st class stamps at 5% off (though you’re only allowed a maximum of 72 stamps in one transaction, and stock is dwindling), although Costco regularly sells them at a discount. See Cheap Stamps for more.
EVERYONE should stock up for personal use. The likelihood of stamp prices ever being cheaper than now, while not impossible, is phenomenally unlikely.
So buying all you can afford that you’ll need for personal usage is important. Don’t just think of Christmas 2012’s cards, but years beyond that too. Remember to keep them somewhere safe, which you won’t forget, and don’t buy unless you’ll definitely really use them in future.
Stamps are not legal tender, but that’s irrelevant. Since the price hike I’ve been regularly asked if stamps are legal tender. They’re not, but it’s not an issue. Most are asking based on a misunderstanding of what legal tender means.
It’s actually a technical term that means if you’ve a court-ordered debt against you and you repay in legal tender, the debt repayment cannot be refused. Many wrongly think it means "a shop has to take it" – but no shop needs to take payment if it chooses not to, whether it’s legal tender being used or not.
As an aside, it’s worth noting that in Scotland, neither English nor Scottish bank notes are legal tender (just some coins), while in England, only Bank of England notes are.
I suspect what most people mean by the question is "can I use stamps to pay for something?" The simple answer is yes, provided the other party is willing to accept them. The advantage of using stamps for purchasing is they have a ready and quantifiable value, which may make them more acceptable to someone – though of course, the majority of shops won’t accept them.
If you’re an eBay seller, there could be profit to be had. Those who sell on eBay often charge postage, based on the prevailing rates. Therefore stocking up on stamps now at 46p when you can charge 60p for first class postage is an easy way to net those who sell frequently on eBay a handy profit.
There is no Royal Mail facility to buy back stamps. This is a question that’s been rocketing into my Twitter account. There seems to be an urban myth that the Royal Mail must buy back stamps – it’s not true. I’ve checked – once you buy them, they’re yours and you can’t give them back.
It is legal to resell stamps. When I asked the Royal Mail, it replied: "It is legal to resell unused postage stamps. Retail agents who have a contract with us are not allowed to sell them at above face value.” So those who want to buy stamps now in the hopes of flogging them at a higher price later could make serious cash.
The effective return on selling stamps is 30%. Take this chap who tweeted me, one of the many spending really serious amounts of cash:
"I’ve just bought £1,750 worth of stamps". If he were to sell them all at the full future price he’d get £2,300 back – a 30% return.
This is a phenomenal return, to get the same back in a top easy access cash ISA at current 3.5% rates would take eight years.
Don’t assume selling will be easy. Of course you could just put the stamps on eBay. Yet many will be sceptical of someone selling stamps. Even though it’s legal, it has a dodgy feel to it – and why would anyone buy them at full price from you when they can do the same from the Post Office?
Never mind the fact that one of the reasons for the hikes is people are shifting online – and thus stamp use is decreasing.
So to do this, you’d need to sell at a decent discount, perhaps 53p per stamp, which cuts the return down. And to make it worthwhile, it’d need to be in bulk. Don’t think too much about selling hugely to the business market, as even after the price hikes the cost of 1st class franking will be only 44p, and 31p for 2nd class.
I’m not saying it can’t be done, but don’t undertake it too lightly.
Sell stamps as a business and you need to pay tax on the profits.
If you’ve never done this type of thing before, it’s important to understand the tax implications. While you are allowed to flog your own old stuff without paying income tax on it, those who buy and sell as work to profit – even part-time – can be defined as traders. If that happens, then income tax is due on the profits (the money you make after purchasing and other costs, not the total sales).
The exact amount this will hit you at depends on what your tax rate is (see the Income Tax Calculator). For example, a student earning under the £8,105 personal allowance (the amount you can earn before paying tax) won’t be impacted, but a higher rate taxpayer will see 40% of profits disappear.
However, in the unlikely but not unheard of event that someone would accept stamps post-price rise that you bought now, you could be quids in.
Whether you do it or not is up to you – certainly I would suggest stocking up soon for personal use. Whether you make a business move is another question – let me know below if you’re planning it.
