More and more people are selling items online, whether it’s unwanted clothes on Vinted, old furniture on Facebook Marketplace, or making additional income (sometimes called a ‘side hustle’) through eBay, Etsy, or Amazon. But when does selling online cross the line into something HMRC views as taxable?
If you’ve wondered whether you need to pay Income Tax on your online sales, this guide explains the rules, the thresholds, and what you need to do to stay compliant.
Not sure if your online sales count as trading? We’ll guide you through Self Assessment, help you claim expenses, and set you up for Making Tax Digital with support whenever you need it. Contact our accountants today.
From decluttering to trading: Understanding the £1,000 trading allowance
HMRC understands that people may occasionally sell personal items online, simply to declutter, not to run a business.
If you’re selling personal items at a loss, like used clothes on Vinted or an old sofa on Facebook Marketplace, it’s not considered a trading activity, so it’s not taxable. The trading allowance is not intended for this type of casual selling.
But…
If you’re selling goods or services regularly with the intention of making a profit, HMRC may view it as a trade, and the £1,000 trading allowance applies. This means:
- If your total sales from selling products or services online are under £1,000 in a tax year, you don’t need to register for Self Assessment or declare the income.
- If your total sales exceed £1,000, you will need to declare the income to HMRC.
It doesn’t automatically mean you’ll pay tax (that depends on your taxable income after expenses and allowances), but it does mean you must report it.
How will HMRC know about my sales?
Technology has come so far over the years, and many digital platforms are now required to report details of sellers’ income directly to HMRC.
This change took place in January 2024, when a new reporting rule came into force under an international agreement called the Organisation for Economic Co-operation and Development (OECD) framework for digital platforms.
It means that online platforms must collect and share data with tax authorities about how much money sellers earn each calendar year.
This includes UK-based sellers using platforms such as:
- eBay
- Etsy
- Vinted
- Amazon
- Airbnb (if you rent out a spare room or property)
- Uber and other taxi-driving platforms
- Delivery apps like Deliveroo
How HMRC decides if you need to pay tax on online goods
Since not all online sales are taxable, HMRC assesses whether your online activity falls into the business category or reflects a hobby. This is where they use the data collected from online platforms and the 9 ‘badges of trade’ to determine where you stand.
| Badge of Trade | What it means | Example |
|---|---|---|
| Profit motive | Are you selling with the intention of making a profit? | Buying items cheaply at car boot sales or online, then reselling them for more on eBay. |
| Frequency of transactions | Are you selling regularly rather than occasionally? | Regularly listing multiple handmade products on Etsy each month. |
| Nature of the asset | Is what you’re selling something that’s typically bought to resell or to make money from? | Buying batches of phone accessories to sell online, rather than clearing personal belongings. |
| Length of ownership | Did you sell the item soon after buying it? | Buying limited-edition trainers and reselling them within weeks to make a profit. |
| Modifications or improvements | Have you changed or improved the item to make it more saleable? | Refurbishing second-hand furniture to sell for a higher price. |
| Circumstances of sale | How are you selling the items (via an online store or on eBay)? | Setting up an online shop with branding, pricing, and customer service, like a business. |
| Source of finance | Did you borrow money to buy items for resale? | Taking out a small loan to buy stock to sell on Amazon for more money. |
| Method of acquisition | Did you make, buy, or receive the goods with the intent to sell? | Creating handmade crafts specifically to sell online as a ‘side hustle.’ |
| Similar trading activity | Do your sales resemble those of a recognised business? | Operating in the same way as other small eCommerce sellers, including packaging, pricing, and promotions. |
You can also use the Gov Guidance to check if you need to notify HMRC about your online sales or speak to Treetops. We are always happy to help.
Examples of when your online sales may be taxable
Your intentions and the amount you earn play a significant role in determining whether a sale is taxable. If your online activity is organised, repeated, and profit-driven, HMRC may expect you to declare profits and pay Income Tax.
It may help to see examples. Use the table below to help you determine whether your sales are taxable or not.
| Taxable | Not taxable |
| Buying second-hand furniture at a low cost, refurbishing it, and reselling it for a profit. | Selling your used sofa on Facebook Marketplace or old clothes on Vinted for less than you paid. |
| Regularly selling handmade jewellery on Etsy for extra income. | A one-off car boot sale where you clear out unwanted household items. |
| Providing services online (e.g. tutoring, graphic design, freelance writing). | |
| Renting out your spare room on Airbnb (or similar platform) if your rental income exceeds allowances. But you may be eligible for the Rent a Room Scheme. | |
| Providing food delivery or taxi services via online platforms like Uber, Deliveroo, Just Eat, etc. |
If you’re having a clear out and sell some valuable items (for example, Jewellery, Paintings, Antiques or Rare coins or stamps) for more than £3,000, then, although you won’t be expected to pay Income Tax, you may have to pay Capital Gains Tax on the gain.
What are the reporting rules for online sellers?
If your online sales exceed the £1,000 trading allowance in a tax year, you must:
- Register for Self Assessment with HMRC (if not already registered).
- Keep records of your sales, expenses, and profits.
- Submit a tax return each year, declaring your online sales as part of your total taxable income.
From 2026, Making Tax Digital for Income Tax will also apply to many self-employed individuals and landlords. This means you’ll need to use MTD-compatible accounting software to keep records and submit quarterly updates. Preparing now will put you in a much better position when you need to declare income digitally.
Are you ready to save time and money with our accounting services?
Here at Treetops we understand your time is precious! We pride ourselves on helping small to medium businesses navigate the complexities of accounting and tax, whilst instantly freeing up your time to focus on business growth.
How Treetops Accountants can help you
At Treetops Chartered Accountants, we make tax feel simple and stress-free. If you’re selling goods or services online and aren’t sure about where you stand with HMRC, we can help.
We’ll assess whether your online activity counts as trading, help you register for Self Assessment if needed, advise on deductible expenses, and prepare you for Making Tax Digital with the right tools and advice. You’ll have ongoing support and someone to turn to for advice whenever you need it, so you can feel confident about your finances.
Contact us today or request a call back at a time that suits you.
Frequently asked questions about selling online
Does selling goods from my hobby count as trading?
It depends. If you occasionally sell handmade items for fun, this may not count as a trade. But if you regularly make and sell items with the intention of making a profit, this can be classed as a trading activity, and you may need to declare the income.
What kind of records should I keep for my online sales?
When regularly selling items or services online, you should keep records of:
- Each item sold and the sale price
- Any expenses (postage, packaging, platform fees, materials, etc.)
- Date of transactions
- Payments received
Which digital platforms report back to HMRC?
Many digital platforms are required to report information to HMRC about the earnings of online sellers. This includes eBay, Etsy, Vinted, Amazon, Airbnb, Uber, and Deliveroo, among others.
Is this a new tax rule?
The tax itself isn’t a new rule, as income from trading has always been taxable. However, the reporting requirements for online platforms are new and are there to enforce fairer tax compliance across the UK tax system, making it harder to hide undeclared income.
