Selling on Vinted, eBay or Etsy? How to avoid the tax traps catching out casual sellers

Side hustles have become commonplace but make sure you know the legal limits

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Clearing out a wardrobe on Vinted, flipping trainers on eBay or selling handmade candles on Etsy can feel like easy money.

For many people, it starts as a harmless side hustle - a way to declutter, top up savings or ease cost-of-living pressures.

But thousands of casual sellers are drifting into tax trouble without realising it.

With HMRC now receiving more data directly from digital platforms, the line between a hobby and taxable income has never mattered more, and it’s easier to cross than many people think.

When does selling online become taxable?

A common assumption is that tax only applies if you see yourself as “running a business”. In reality, HMRC looks at behaviour rather than labels.

“One of the things HMRC looks at is why and how you’re selling,” says Lee Murphy, managing director of The Accountancy Partnership. “They refer to it in their tax manuals as ‘the badges of trade’. If you’re occasionally selling unwanted personal items, that’s usually not taxable.

“But once you start buying with the intention of reselling, listing regularly, or aiming to make a profit, you’ve likely crossed the line from a hobby into a taxable trade.”

Selling a few old clothes is unlikely to cause problems. Buying stock, sourcing materials or deliberately reselling items for profit is a different story.

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“A common misconception is that small or informal online sales don’t count,” Murphy adds. “In reality, frequency, intent and profit motive matter far more than whether you think of yourself as ‘running a business’.”

The £1,000 allowance and the common pitfalls

Much of the confusion centres on the ‘trading allowance’, which allows individuals to earn up to £1,000 a year from trading income before needing to declare it. But many sellers misunderstand how it works.

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“You won’t get a separate £1,000 trading allowance for each platform,” Murphy says. “The trading allowance is the total amount you can get from this type of selling during one tax year, so make sure you add everything together to check where you’re up to - HMRC will collate the data they receive.”

Another frequent mistake is confusing income with profit.

“You’ll pay tax on your profit, but this £1,000 allowance is based on income - before deducting any allowable expenses or tax relief,” Murphy explains.

Platform fees, postage and materials may reduce taxable profit later on, but they do not reduce the £1,000 threshold itself.

Platforms are now reporting to HMRC

This year marks a step change in enforcement. As of January, digital platforms such as eBay, Vinted and Etsy are required to send annual reports to HMRC detailing sellers’ activity, giving the tax authority far greater visibility over online income.

“The tax rules themselves have not changed - online sellers who make sales of £1,000 or more have always been required to register with HMRC to report their income and pay tax on their profits,” says Helen Thornley, technical officer at the Association of Taxation Technicians.

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But there is no need for panic. “Selling some unwanted Christmas gifts or clothes the kids have grown out of is unlikely to mean they have tax to pay, even if HMRC receives information about the sales,” Thornley says.

However, she adds that sellers with a profit motive do need to take stock.

“Making or buying things with a view to selling at a profit and making over £1,000 of income (before expenses) each tax year need to carefully consider whether they could have tax to pay”, she says.

Watch the dates and keep records

Another trap is timing. Tax is calculated by tax year, from 6 April to 5 April, but platform reports cover the calendar year.

“Taxpayers can’t simply use the figures sent to them by the platforms in January when preparing their tax returns,” Thornley says.

“This highlights the importance of keeping good business records.”

What if you’ve already made a mistake?

If you think you should have declared income and didn’t, ignoring it is the worst option. “HMRC is far more reasonable with people who come forward voluntarily than with those who wait to be contacted,” Murphy says. “It’s in their own best interests to help taxpayers pay tax.”

The first step is straightforward: gather sales, fees and expenses, then get advice if needed. “Getting advice early can often reduce stress, penalties and cost,” Murphy adds. “Most issues are fixable - but they’re much easier to resolve before HMRC raises questions.”

For anyone selling online, the message is clear. If it feels like more than a clear-out, the tax rules probably apply, and HMRC is watching more closely than ever.

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