Online Marketplaces (ebay, etsy) Will Report Sellers’ Income to HMRC – What Does This Mean for Casual Sellers?
- Adil Akhtar
- Jul 8
- 15 min read
Updated: Sep 7
The Audio Summary of the Key Points of the Article:
Understanding HMRC’s New Reporting Rules for Online Sellers
So, you’ve been selling a few old clothes on eBay or handmade crafts on Etsy, and now you’ve heard HMRC is sniffing around your side hustle. What’s the deal? As of 1 January 2024, online marketplaces like eBay, Etsy, Vinted, and Depop are required to report seller income to HM Revenue & Customs (HMRC) if you meet certain thresholds. This isn’t a new tax, but a beefed-up way for HMRC to ensure everyone’s paying what they owe. Let’s break it down for casual sellers—those of you clearing out the loft or dabbling in small-scale selling without running a full-blown business.
Why Are Online Marketplaces Reporting to HMRC?
Now, it shouldn’t be a surprise that HMRC wants to keep tabs on online income. The rise of side hustles—think Gen Z flipping vintage trainers or parents selling outgrown baby gear—has exploded, with platforms like eBay and Etsy facilitating billions in transactions. The UK’s adoption of OECD rules means platforms must now share data on sellers who either make 30 or more transactions or earn £1,740 or more (roughly €2,000, after fees and taxes) in a calendar year. By 31 January 2025, platforms reported 2024 sales data to HMRC, and they’ll do this annually. You’ll get a copy of this data too, which is handy for checking your income.
What’s the £1,000 Trading Allowance All About?
Let’s get to the good news first: not every penny you make online is taxable. The Trading and Miscellaneous Income Allowance lets you earn up to £1,000 per tax year (6 April to 5 April) from trading or casual income without needing to tell HMRC or pay tax. So, if you’re selling old DVDs or handmade earrings and your total gross income (before platform fees) is under £1,000, you’re in the clear—no tax return needed. But if you cross that threshold, you’ll likely need to register as self-employed and file a self-assessment tax return.
Here’s a quick table to clarify the trading allowance:
Scenario | Gross Income (6 Apr–5 Apr) | Action Required |
Selling personal items (e.g., old clothes) | Under £1,000 | No tax, no reporting |
Side hustle (e.g., reselling trainers) | Under £1,000 | No tax, no reporting |
Side hustle or trading | Over £1,000 | Register for self-assessment, declare income |
High-value personal item (e.g., painting) | Over £6,000 | May owe Capital Gains Tax on profit |
Are You Trading or Just Decluttering?
Here’s where it gets tricky: HMRC cares about whether you’re trading or just selling personal stuff. Trading means you’re buying or making goods to sell for a profit, like purchasing bulk phone cases to resell on eBay or crafting candles for Etsy. If you’re just flogging your old sofa or kids’ toys, that’s not trading—those are personal possessions, and you’re unlikely to owe income tax unless the item’s worth over £6,000, which could trigger Capital Gains Tax (CGT) on the profit. For example, if you sell a painting you bought for £4,000 for £7,000, you might owe CGT on the £3,000 profit, but only if your total capital gains exceed the £3,000 annual CGT allowance for 2025/26.
Case Study: Aled’s eBay Side Hustle
Consider Aled, a Cardiff-based teacher who started selling vintage records on eBay in 2024. He buys records at car boot sales for £2 each and sells them for £10, making £800 profit after fees. Since his income is under £1,000, he doesn’t need to report it. But in 2025, Aled ramps up, selling £2,500 worth of records. Now he’s over the £1,000 threshold, so he must register as self-employed by 5 October 2025 and file a tax return by 31 January 2026. HMRC already has his sales data from eBay, so ignoring it isn’t an option. Aled’s story shows why tracking income is crucial once you scale up.
What Data Are Platforms Sharing with HMRC?
Be careful! Platforms aren’t just handing over your total sales figure. They’re sharing your name, address, date of birth, National Insurance number, and transaction details (number of sales and income, excluding fees, shipping, and VAT). If you hit the 30-transaction or £1,740 threshold, eBay or Etsy will notify you and provide a report (PDF and CSV) via your seller dashboard. This transparency means HMRC can cross-check your sales against your tax return, making it harder to under-report income.
Why This Matters for Casual Sellers
Now, if you’re just selling a few bits and bobs, you might wonder why this matters. The key is that HMRC’s new powers make it easier to spot discrepancies. If you’re casually selling but accidentally cross into trading territory (e.g., regularly buying stock to resell), HMRC’s data could trigger a “nudge letter” asking you to declare income or complete a “Certificate of Tax Position.” Ignoring these letters can lead to penalties or a formal compliance check. In 2024, HMRC sent thousands of such letters, with compliance activity expected to rise in 2025 due to a £39.8 billion tax gap.
Step-by-Step Guide: Checking If You Need to Report Income
So, the question is: how do you know if you’re on HMRC’s radar? Follow these steps to stay compliant:
Track Your Income: Check your eBay or Etsy seller dashboard for 2024/25 sales. Include all platforms if you sell on multiple (e.g., Vinted and Depop).
Assess Trading Status: Are you selling personal items (no tax) or buying/making goods for profit (potential tax)? Use HMRC’s online tool at www.gov.uk/check-additional-income-tax.
Check the £1,000 Threshold: If your gross income from trading exceeds £1,000, register as self-employed at www.gov.uk/register-for-self-assessment.
Monitor High-Value Sales: If you sell an item over £6,000, calculate the profit and check if it exceeds the £3,000 CGT allowance.
Keep Records: Save sales reports, receipts, and expense records (e.g., eBay fees, postage) for at least five years.
Respond to HMRC Letters: If you get a nudge letter, reply within 30 days using the Digital Disclosure Facility or by calling 0300 123 0998.
Navigating Tax Obligations and Avoiding Pitfalls for Casual Sellers
Now, you’re probably wondering how to actually deal with these new HMRC rules without landing in hot water. Whether you’re flogging old gadgets on eBay or selling handmade scarves on Etsy, the tax implications can feel like a maze. This section dives into the nitty-gritty of calculating what you owe, staying compliant, and sidestepping common traps that casual sellers in the UK face in 2025. We’ll also look at real-world scenarios to make sense of it all, with a focus on practical steps to keep your side hustle stress-free.
How Do You Calculate Taxable Income from Online Sales?
Let’s start with the basics: if your side hustle earns over £1,000 in gross income (before fees) in a tax year (6 April to 5 April), you’ll likely need to pay tax on the profit. The key word here is profit—HMRC doesn’t tax your total sales, only the money you make after expenses. For example, if you sell £2,000 worth of vintage clothes on Vinted but spent £800 on stock, postage, and platform fees, your taxable profit is £1,200. You can either claim the £1,000 trading allowance (deducting it from your profit, so you’d pay tax on £200) or deduct actual expenses (e.g., £800, so you’d pay tax on £1,200).
Here’s a table to show how it works:
Scenario | Gross Income | Expenses | Trading Allowance | Taxable Profit | Tax at 20% (Basic Rate, 2025/26) |
Using Trading Allowance | £2,000 | £800 | £1,000 | £1,000 (£2,000 - £1,000) | £200 |
Using Actual Expenses | £2,000 | £800 | N/A | £1,200 (£2,000 - £800) | £240 |
Note: Tax rates assume you’re a basic-rate taxpayer (income between £12,570 and £50,270 in 2025/26). Higher rates (40% or 45%) apply if your total income exceeds these bands. Source: www.gov.uk/income-tax-rates.
So, the question is: should you take the trading allowance or claim expenses? If your expenses are low (e.g., selling digital downloads on Etsy), the trading allowance is usually better. But if you have high costs (e.g., buying stock or materials), claiming expenses could save you more. Keep receipts for everything—HMRC might ask for proof during a compliance check.
What Happens If You Sell High-Value Personal Items?
Be careful! Selling personal items like an old watch or a piece of art can trigger Capital Gains Tax (CGT) if the sale price exceeds £6,000 and you make a profit. For 2025/26, the CGT annual exempt amount is £3,000, meaning you only pay tax on gains above this. For instance, if you sell a rare comic book you bought for £5,000 for £8,000, your gain is £3,000. If you have no other gains that year, you won’t owe CGT because it’s within the exemption. But if you sell multiple high-value items and your total gains exceed £3,000, you’ll pay 10% (basic-rate taxpayers) or 20% (higher-rate taxpayers) on the excess.
Case Study: Sioned’s Vinted Sales Mix-Up
Now, consider Sioned, a Swansea-based nurse who sells clothes on Vinted. In 2024/25, she makes £1,500 from selling old dresses (personal items, no tax) and £1,200 from reselling charity shop finds (trading). She assumes it’s all tax-free because some sales are personal, but HMRC’s data from Vinted shows £2,700 in total sales. Since her trading income (£1,200) exceeds the £1,000 allowance, she must register for self-assessment. Sioned’s mistake was not separating personal and trading sales, which could lead to a penalty if HMRC audits her. Her story highlights the importance of tracking what’s trading versus decluttering.
How Do You Stay Compliant with HMRC?
None of us wants a nasty letter from HMRC, so let’s talk about staying on their good side. If your trading income exceeds £1,000, you must register as self-employed by 5 October following the tax year (e.g., 5 October 2025 for 2024/25). You’ll then file a self-assessment tax return by 31 January 2026 (online) or 31 October 2025 (paper). Late registration or filing can lead to penalties starting at £100, with additional fines for unpaid tax (up to 7.75% interest in 2025). Use HMRC’s free tools at www.gov.uk/check-if-you-need-tax-return to confirm your obligations.
Here’s a practical worksheet to track your income and expenses:
Category | Details | Amount (£) | Notes |
Gross Sales | eBay/Etsy sales | Check platform reports | |
Expenses | Stock costs | Keep receipts | |
Expenses | Platform fees | Check seller dashboard | |
Expenses | Postage | Save shipping labels | |
Profit | Gross sales - expenses | Compare to £1,000 allowance |
Common Pitfalls and How to Avoid Them
Now, it’s easy to trip up, so let’s cover some traps. First, under-reporting income is a big no-no. Since platforms report your sales directly to HMRC, discrepancies can trigger audits. In 2024, HMRC’s compliance checks on online sellers led to £1.9 million in recovered tax, per GOV.UK data. Second, mixing personal and trading sales (like Sioned) can confuse your tax status—keep separate records. Third, ignoring nudge letters can escalate to formal investigations. If HMRC contacts you, respond promptly via their Digital Disclosure Facility at www.gov.uk/report-tax-fraud.
Can You Claim Expenses to Reduce Your Tax Bill?
Here’s a silver lining: you can deduct legitimate business expenses to lower your taxable profit. These include stock costs, platform fees, postage, packaging, and even a portion of home office costs (e.g., electricity) if you work from home. For example, if you earn £3,000 on Etsy but spend £1,200 on materials and fees, your taxable profit is £1,800. If you’re a basic-rate taxpayer, you’d owe £360 in tax (20% of £1,800). Keep detailed records, as HMRC may request evidence during a review.
What If You’re Also Employed Full-Time?
So, if you’re juggling a day job and a side hustle, how does this fit with your taxes? Your Personal Allowance (£12,570 for 2025/26) covers all income, including employment and trading. If your total income (salary + side hustle) exceeds £12,570, you’ll pay 20% on the excess up to £50,270, 40% up to £125,140, and 45% beyond that. If you’re on PAYE, your employer handles most of your tax, but you’ll need to declare side hustle income via self-assessment. For example, if your salary is £30,000 and your Etsy profit is £2,000, your total income (£32,000) is taxed after the £12,570 allowance, so you’d owe tax on £19,430.
Key Takeaways and Proactive Steps for UK Casual Sellers
Now, if you’ve been following along, you’ve got a solid grasp of HMRC’s new reporting rules and how they affect your eBay or Etsy side hustle. This final part pulls together the most critical points in a clear, concise way and offers proactive steps to keep you ahead of the tax game. Whether you’re a casual seller clearing out your attic or a budding entrepreneur, these insights will help you stay compliant and avoid surprises in 2025 and beyond. Let’s wrap this up with practical advice and a fresh perspective on managing your online sales.
What Should You Do If You’re Just Selling Personal Items?
Let’s clear this up: if you’re only selling personal items—like old clothes, books, or that dusty guitar in the loft—you’re probably in the clear for income tax. HMRC doesn’t tax these sales unless they’re high-value items triggering Capital Gains Tax (CGT). For example, if you sell a collectible vinyl for £7,000 that you bought for £2,000, your £5,000 profit could be taxable if it exceeds the £3,000 CGT allowance for 2025/26. Keep a record of what you paid for high-value items, as HMRC may ask for proof. Use a simple spreadsheet to track sale prices and original costs to avoid headaches later.
How Can You Prepare for Self-Assessment?
So, the question is: what if your side hustle is more than just decluttering? If you’re trading—buying goods to resell or making items for profit—you’ll need to file a self-assessment tax return if your gross income exceeds £1,000. Start preparing now by setting up a system to track your sales and expenses. Apps like QuickBooks or FreeAgent can sync with eBay or Etsy to automate this, or you can use a basic Excel sheet. For instance, Rhiannon, a Bristol-based crafter, uses Etsy’s sales reports to log her £4,000 annual income and £1,500 in expenses (materials, fees). She deducts expenses, pays tax on £2,500, and avoids penalties by filing early.
What Are the Risks of Ignoring HMRC?
Be careful! Ignoring HMRC’s nudge letters or failing to register as self-employed can lead to serious consequences. In 2024, HMRC’s compliance efforts targeted online sellers, recovering £1.9 million in unpaid taxes, according to GOV.UK. Penalties for late registration start at £100, with additional fines for late filing (up to £900) or unpaid tax (up to 100% of the tax owed). If you’re unsure, contact HMRC’s helpline at 0300 200 3300 or use their online disclosure facility at www.gov.uk/report-tax-fraud to come clean voluntarily—this can reduce penalties significantly.
Can You Save Money by Planning Ahead?
Now, consider this: planning ahead can cut your tax bill. If your trading income is close to £1,000, you might delay sales to stay under the threshold. For example, if you’ve earned £900 by March 2025, wait until after 5 April to make more sales, as the new tax year resets your £1,000 allowance. Alternatively, if you’re over the threshold, claim all allowable expenses—stock, fees, postage, even a portion of your internet bill if you sell from home. In 2024/25, HMRC allowed deductions for “proportionate” home office costs, so if 10% of your home is used for business, you can claim 10% of relevant bills.
Case Study: Dafydd’s High-Value Mistake
Here’s a cautionary tale: Dafydd, a Liverpool-based mechanic, sold a vintage motorbike on eBay for £10,000 in 2024, which he’d bought for £3,000. He assumed it was tax-free as a personal item, but the £7,000 profit triggered CGT because it exceeded the £3,000 allowance. Dafydd owed £800 (20% of £4,000 after the allowance) but didn’t report it, leading to a £100 penalty and interest when HMRC caught up via eBay’s data. His lesson? Always check CGT rules for high-value sales and report them via self-assessment, even if you’re not trading.
How Can You Use HMRC’s Tools to Stay Compliant?
None of us is a tax expert, but HMRC makes it easier with free online tools. Their “Check if you need to do a tax return” tool at www.gov.uk/check-if-you-need-tax-return takes five minutes and clarifies your obligations. If you’re trading, register for self-assessment at www.gov.uk/register-for-self-assessment by 5 October 2025 for 2024/25 income. You can also use HMRC’s Digital Assistant or call their Self-Assessment helpline (0300 200 3310) for guidance. Pro tip: set a calendar reminder for key deadlines (31 October for paper returns, 31 January for online) to avoid fines.
Summary of the Most Important Points
Online marketplaces like eBay and Etsy report your sales to HMRC if you make 30+ transactions or earn over £1,740 annually, starting from 2024.
The £1,000 trading allowance lets you earn up to £1,000 tax-free from side hustles without reporting, but you must register for self-assessment if you exceed it.
Selling personal items is usually tax-free unless the sale price exceeds £6,000, which may trigger Capital Gains Tax on profits above the £3,000 allowance.
Trading (buying/making goods for profit) requires separating personal and business sales to avoid HMRC confusion.
Keep detailed records of sales, expenses, and original purchase prices for at least five years to support tax filings or audits.
Claim allowable expenses like stock, fees, and postage to reduce your taxable profit, or opt for the £1,000 trading allowance if expenses are low.
Register as self-employed by 5 October following the tax year if your trading income exceeds £1,000, and file by 31 January to avoid penalties.
HMRC’s compliance checks are increasing, with platforms sharing your name, National Insurance number, and transaction details, making under-reporting risky.
Use HMRC’s online tools or helplines to check your tax status and file disclosures to minimize penalties if you’ve made errors.
Plan sales strategically to stay under the £1,000 threshold or maximize deductions to lower your tax bill.
FAQs
Q1: Do online marketplaces report all seller transactions to HMRC?
A1: No, platforms like eBay and Etsy only report transactions for sellers who make 30 or more sales or earn over £1,740 (approximately €2,000) in a calendar year, excluding fees, shipping, and VAT.
Q2: Can casual sellers appeal an HMRC penalty for late tax filing?
A2: Yes, sellers can appeal penalties by providing a reasonable excuse, such as illness or technical issues, through HMRC’s online appeal service or by contacting the Self-Assessment helpline.
Q3: What happens if a seller’s National Insurance number is not provided to the platform?
A3: If a seller doesn’t provide their National Insurance number, platforms may still report their sales to HMRC using other identifiers like name and address, but this could lead to delays or compliance checks.
Q4: Are sales from platforms like Vinted treated the same as eBay and Etsy for tax purposes?
A4: Yes, Vinted and similar platforms follow the same HMRC reporting rules, sharing data for sellers exceeding 30 transactions or £1,740 in annual sales.
Q5: Can sellers deduct advertising costs for their online listings?
A5: Yes, sellers can deduct advertising costs, such as promoted listing fees on eBay or Etsy ads, as allowable business expenses when calculating taxable profit.
Q6: How does HMRC verify the accuracy of platform-reported data?
A6: HMRC cross-checks platform data against self-assessment tax returns and may request additional records, like bank statements or receipts, during compliance checks.
Q7: Are international sellers on UK platforms subject to HMRC reporting?
A7: International sellers are reported to their local tax authorities under OECD rules, but UK-based platforms may still share their data with HMRC if they sell to UK customers.
Q8: Can sellers use accounting software to simplify tax reporting?
A8: Yes, software like QuickBooks, Xero, or FreeAgent can sync with eBay or Etsy to track sales, expenses, and profits, making tax return preparation easier.
Q9: What is the deadline for paying any tax owed from online sales?
A9: Tax owed from online sales must be paid by 31 January following the tax year, alongside the self-assessment tax return submission deadline.
Q10: Do sellers need to pay VAT on their online sales?
A10: Sellers only need to register for VAT if their taxable turnover exceeds £90,000 per year; most casual sellers won’t reach this threshold.
Q11: Can sellers claim tax relief for equipment used in their side hustle?
A11: Yes, sellers can claim capital allowances for equipment like computers or tools used for their business, reducing their taxable profit.
Q12: What happens if a seller’s income is reported but they’re under the £1,000 threshold?
A12: If a seller’s income is below £1,000 and not from trading, they don’t need to report it or pay tax, even if platforms report it to HMRC.
Q13: Are there tax implications for selling digital products on Etsy?
A13: Yes, digital products like printables or patterns are treated as trading income, taxable if over £1,000 annually, similar to physical goods.
Q14: Can sellers spread their income across multiple tax years to stay under thresholds?
A14: Sellers can strategically time sales to stay under the £1,000 trading allowance by delaying transactions until after 5 April, starting a new tax year.
Q15: How does HMRC handle discrepancies between reported and declared income?A15: HMRC may send a nudge letter or initiate a compliance check, requiring sellers to explain discrepancies or disclose income via the Digital Disclosure Facility.
Q16: Are there tax exemptions for selling second-hand items bought at a loss?
A16: Selling personal items at a loss (e.g., clothes sold for less than purchased) incurs no tax, as there’s no profit to tax under income or CGT rules.
Q17: Can sellers claim travel expenses for sourcing stock?
A17: Yes, travel expenses like fuel or train fares for buying stock can be deducted as business expenses, provided they’re wholly for business purposes.
Q18: What records should sellers keep if they’re audited by HMRC?
A18: Sellers should keep sales reports, receipts for expenses, purchase records for high-value items, and bank statements for at least five years.
Q19: Do sellers need to inform HMRC if they stop trading?
A19: Yes, sellers should notify HMRC to deregister as self-employed if they stop trading, using the online service or by contacting the Self-Assessment helpline.
Q20: Can sellers get tax advice from HMRC directly?
A20: Yes, HMRC offers free advice through their Self-Assessment helpline (0300 200 3310) or online Digital Assistant, helping clarify tax obligations for online sellers.
About The Author:
Adil Akhtar, ACMA, CGMA, CEO and Chief Accountant of Pro Tax Accountant, is an esteemed tax blog writer with over 10 years of expertise in navigating complex tax matters. For more than three years, his insightful blogs have empowered UK taxpayers with clear, actionable advice. Leading Advantax Accountants as well, Adil blends technical prowess with a passion for demystifying finance, cementing his reputation as a trusted authority in tax education.
Email: adilacma@icloud.com
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