Turning a declutter into cash on Vinted, flipping items on eBay, or selling handmade goods on Etsy has become a popular way for Britons to boost their income. However, a significant number of casual sellers are unwittingly drifting into tax trouble, with HM Revenue & Customs (HMRC) now watching more closely than ever.
The Fine Line Between Hobby and Taxable Trade
A widespread assumption is that tax only applies if you consciously consider yourself to be 'running a business'. In reality, HMRC's approach is more nuanced, focusing on behaviour rather than personal labels. Lee Murphy, managing director of The Accountancy Partnership, explains that the tax authority uses indicators known as 'the badges of trade' to make its assessment.
Selling a few old, unwanted personal items from your wardrobe is typically not a taxable activity. The situation changes, however, once you begin sourcing items or materials with the specific intention of reselling, list products regularly, or actively aim to turn a profit. At this point, you have likely crossed from a hobby into a taxable trade.
"Frequency, intent and profit motive matter far more than whether you think of yourself as 'running a business'," Murphy adds, warning against the misconception that small or informal sales do not count.
Navigating the £1,000 Trading Allowance and Common Pitfalls
Central to the confusion is the 'trading allowance', which permits individuals to earn up to £1,000 per tax year from trading income before they are required to declare it to HMRC. A critical point many miss is that this is a single, cumulative allowance.
"You won't get a separate £1,000 trading allowance for each platform," Murphy states. "The trading allowance is the total amount you can get from this type of selling during one tax year." Sellers must add together all income from platforms like Vinted, eBay, and Etsy to check their position, as HMRC will be collating the data it receives.
Another frequent error is misunderstanding what the allowance covers. The £1,000 threshold is based on your total sales income, not your profit. Allowable expenses such as platform fees, postage, or material costs can be deducted later to calculate your taxable profit, but they do not reduce the £1,000 income limit itself.
Platforms Are Now Reporting Directly to HMRC
The enforcement landscape shifted markedly in January 2025. Digital platforms, including eBay, Vinted, and Etsy, are now mandated to send annual reports directly to HMRC, detailing sellers' activity. This gives the tax authority unprecedented visibility over online side incomes.
Helen Thornley, a technical officer at the Association of Taxation Technicians, clarifies: "The tax rules themselves have not changed." Sellers making over £1,000 in income have always been required to register and report. The key change is HMRC's enhanced ability to see that income.
Thornley urges calm for those selling unwanted gifts or outgrown clothes, as such activity is unlikely to create a tax liability. However, she cautions that individuals "making or buying things with a view to selling at a profit" who exceed the allowance must carefully consider their position.
Sellers must also be mindful of timing. The UK tax year runs from 6 April to 5 April, but platform reports to HMRC cover the calendar year. This discrepancy makes it essential for taxpayers to keep their own comprehensive records rather than relying solely on the annual summary from a platform.
What to Do If You've Made a Mistake
If you believe you should have declared income but failed to do so, experts strongly advise against ignoring the issue. "HMRC is far more reasonable with people who come forward voluntarily," says Murphy. The recommended first step is to gather all records of sales, fees, and expenses, and seek professional advice if needed.
"Getting advice early can often reduce stress, penalties and cost," Murphy adds. For anyone earning money online, the message is clear: if your selling feels more strategic than a simple clear-out, the tax rules almost certainly apply, and HMRC's oversight is now more comprehensive.
