Online Marketplace Sellers and Self Assessment UK 2026/27

Selling unwanted clothes on Vinted, handmade goods on Etsy or second-hand electronics on eBay has never been more popular. But as platforms become mainstream income sources, HMRC's interest has grown in step. Since January 2024, digital platforms operating in the UK must collect and report seller data to HMRC under DAC7 rules. If you sell regularly online and have not thought about tax, now is the time to.

The GBP 1,000 Trading Allowance

The simplest starting point is the trading allowance. You can earn up to GBP 1,000 per tax year from self-employment or trading activity -- including online sales -- without paying tax or filing a return. This is gross income, not profit. If your total online selling income in a tax year is GBP 1,000 or less, you have no tax obligation.

If your income exceeds GBP 1,000, you have two options:

1. Claim the GBP 1,000 trading allowance and pay tax on income above it (no deduction for expenses).
2. Opt out of the allowance and deduct actual allowable business expenses from your income instead, paying tax on the net profit.

Option 2 is better if your costs are high relative to income -- for example, if you buy stock to resell and your profit margin is narrow.

Are You Trading or Just Selling Personal Possessions?

Not all online selling is trading. HMRC distinguishes between selling personal possessions and carrying on a trade.

Selling your own unwanted items -- clothes you no longer wear, furniture from a house clearance, books you have read -- is generally not trading. These are personal possessions, and if you sell them for less than you originally paid, there is no tax to pay. Even if you make a gain, personal possessions worth GBP 6,000 or less at disposal are exempt from CGT.

Trading indicators include:

• Buying items specifically to resell
• Selling in large volumes or with high frequency
• Sourcing goods from wholesalers or manufacturers
• Advertising and presenting yourself as a business
• Making a profit as a primary motive

If HMRC considers you a trader, your profits are income, not capital gains. HMRC looks at the "badges of trade" -- a set of factors courts and HMRC use to determine intent and commerciality.

DAC7: What Platforms Now Report to HMRC

From January 2024, digital platforms operating in the UK are required to collect seller information and report it annually to HMRC under the DAC7 (or UK equivalent) rules. This applies to platforms including eBay, Etsy, Vinted, Airbnb, Amazon Marketplace, Fiverr and similar sites.

Platforms must report sellers who:

• Complete 30 or more transactions in a calendar year, or
• Earn more than EUR 2,000 (approximately GBP 1,700) in total consideration in a calendar year.

The reported data includes your name, address, tax identification number, total earnings and number of transactions. HMRC matches this against tax returns. If you have been selling regularly and not declaring income, a letter from HMRC is increasingly likely.

When You Must Register for Self Assessment

You must register for Self Assessment and file a tax return if:

• Your self-employment or trading income (including online selling) exceeds GBP 1,000 in a tax year.
• You have untaxed income from another source that brings your total taxable income above the personal allowance (GBP 12,570 in 2026/27).

Register by 5 October following the end of the relevant tax year. For 2025/26, that deadline is 5 October 2026. Missing the registration deadline can trigger a penalty even if no tax is due.

Allowable Expenses for Online Sellers

If you opt out of the trading allowance, you can deduct genuine business expenses from your income. For online sellers, these typically include:

• Cost of goods purchased for resale
• Platform selling fees (eBay final value fees, Etsy listing fees, etc.)
• Postage and packaging costs
• PayPal or payment processing fees
• A proportion of home broadband if used for business

You cannot deduct personal expenses, meals or the cost of items you originally bought for personal use.

VAT: Do Online Sellers Need to Register?

If your taxable turnover exceeds GBP 90,000 in any rolling 12-month period, you must register for VAT. Most casual and small-scale online sellers will not reach this threshold. However, if you are running a genuine business and growing rapidly, keep an eye on your 12-month rolling total. Selling on platforms does not exempt you from VAT obligations -- the threshold applies to your overall taxable supplies.

Record Keeping

HMRC expects you to keep records for at least five years from the Self Assessment filing deadline for the relevant year. For online sellers, this means:

• Listings or screenshots showing item descriptions and sale prices
• Receipts for goods purchased for resale
• Platform payment reports and transaction histories
• Postage receipts

Most platforms provide downloadable transaction reports. Download and save them at the end of each tax year.

Practical Steps for 2026/27

If you are actively selling online this year, take these steps now:

1. Track your total gross receipts from all platforms separately.
2. Keep receipts for stock and selling costs.
3. Check whether you are below the GBP 1,000 trading allowance.
4. If above, decide whether to claim the allowance or deduct expenses.
5. Register for Self Assessment by 5 October 2026 if needed.

Use the CalcHub self-employment tax calculator to estimate the tax you owe on your online selling profits: https://calchub.uk/calculators/self-employed-tax