The £1,000 Trading Allowance for Online Sellers, and When a Side Hustle Becomes a Taxable Trade

A wave of headlines in 2024 warned UK sellers to expect a tax crackdown. Platforms including eBay, Vinted, Etsy and Amazon began sharing seller data with HMRC. For many occasional sellers, the natural assumption was that a new tax-free limit had been created or changed. It had not. The figure that actually matters, the £1,000 trading allowance, has existed for years and was not touched. This page corrects that misconception, explains when the allowance applies and when it does not, and addresses the more important underlying question: whether what you are doing is trading in the first place.

The short answer: no new limit was created

The 2024 platform-reporting changes required digital marketplaces to collect and report seller data to HMRC under rules derived from the OECD DAC7 framework. This is a reporting change, not a tax change. It altered what information eBay and Vinted send to HMRC; it did not create a new tax-free limit, lower an existing one, or introduce a new tax on selling. For the full detail on what the platform-reporting rules actually require, see our guide on platform reporting and HMRC letters.

The figure that actually governs whether occasional sellers have a Self Assessment obligation on trading income is the £1,000 trading allowance, which has been in place since 2017.

What the trading allowance is

Under HMRC's trading income allowance guidance, if your annual gross trading income is £1,000 or less, you may not need to file a Self Assessment return for that income. The word "may" matters: if you have other income that triggers a Self Assessment obligation (employment income over certain thresholds, savings interest, dividends), you will still need to file, even if your trading income is below £1,000.

Gross income means your total receipts before any deductions. For a marketplace seller, that is your total sales proceeds, not what the platform pays out after fees. The VAT-threshold equivalent applies here too: it is what the customer paid, not what you received.

Above £1,000: allowance or actual expenses, not both

If your gross trading income exceeds £1,000 in a tax year, you have a choice about how to calculate your taxable profit. You cannot use both routes.

Worked example: reseller on eBay

A reseller buys job lots and sells them on eBay. In the 2025/26 tax year, gross sales receipts are £6,200. Cost of goods sold plus eBay fees plus postage totals £4,100.

• Using the trading allowance: taxable profit = £6,200 minus £1,000 = £5,200
• Using actual expenses: taxable profit = £6,200 minus £4,100 = £2,100

Actual expenses produce a taxable profit roughly £3,100 lower. The allowance route would cost this seller significantly more tax. For goods sellers with real cost of goods sold, using the trading allowance instead of actual costs is usually the worse choice, and is a common mistake among sellers new to Self Assessment.

Source: gov.uk, tax-free allowances on property and trading income.

The bigger question: is what you do actually trading?

The trading allowance and the actual-expenses choice only matter if you are trading. Many sellers who received a letter from HMRC (prompted by the platform-reporting data) are not trading at all. Selling personal possessions you no longer want, whether on Vinted, eBay or Depop, is generally not trading and creates no Self Assessment obligation regardless of how much you receive.

The boundary is not defined by a sales count, a pound threshold, or the number of items listed. It is defined by HMRC's badges of trade, a set of qualitative indicators developed through case law and codified in HMRC's Business Income Manual from BIM20205 onward.

The badges of trade applied to resellers and declutterers

The badges are indicators, not a checklist where ticking a set number produces a definitive answer. HMRC and courts look at the overall picture. The table below shows how the key badges typically apply to two contrasting seller types.

These are the kinds of questions HMRC will examine if the platform-reporting data prompts an enquiry. The presence of several trading badges, particularly a clear profit motive combined with regular purchasing for resale, is strong evidence of a trade. A single sale of a used item at a profit is rarely enough on its own.

For the full HMRC analysis of the badges and the case law behind them, see BIM20205 onward in the Business Income Manual.

If you are trading: Self Assessment and what comes next

If the badges point toward a trade and your taxable profit (after the allowance or actual expenses) exceeds your personal allowance combined with any other income, you will have tax to pay and a Self Assessment filing obligation.

The registration deadline is firm. Under gov.uk/register-for-self-assessment, a new sole-trader seller who becomes chargeable to tax must tell HMRC by 5 October following the end of the relevant tax year. So for income in the year to 5 April 2026, the registration deadline is 5 October 2026. Missing this deadline can result in penalties.

Once registered, your first Self Assessment return will cover the full tax year. If your trading income is growing and you expect to pass the MTD for Income Tax threshold (£50,000 combined self-employment and property income from April 2026, falling in later years), see our guide on MTD for Income Tax for online sellers for what that means in practice.

If you sell on multiple platforms, or if your turnover is approaching the VAT registration threshold (measured on gross marketplace receipts, not net payout), a marketplace-seller accountant can assess your position across all channels. If HMRC has already written to you, see our guide on responding to an HMRC letter about online sales.

Common failure modes

These are the mistakes that generate unexpected tax bills or penalties for online sellers:

1. Using the trading allowance when actual costs are higher. If you buy stock to resell and your costs of goods sold alone exceed £1,000, claiming the allowance rather than actual expenses overstates your taxable profit.
2. Treating the platform-reporting exclusion as a tax-free amount. The rules that determine whether a platform must report your data to HMRC are not a tax-free limit. They are reporting rules. Tax on trading income applies based on your actual profit and the applicable allowances, not on whether a platform has reported you.
3. Assuming no return is needed because sales are under £1,000. The trading allowance covers you only if the income is trading income and only if it is below £1,000 gross. Other income sources can still require a return even if trading income is low.
4. Missing the 5 October registration deadline. If you become chargeable to tax, registration is required by 5 October after the tax year ends. Late registration attracts penalties separate from any tax owed.
5. Treating declutter proceeds and trading income as the same thing. Selling personal possessions is generally not trading. Applying the trading-allowance rules to non-trading receipts is unnecessary and can cause confusion when filling in a return.