Selling online in the UK: do I need to tell HMRC? The £1,000 trading allowance explained

The £1,000 trading allowance: what it covers and what it does not

GOV.UK describes the trading allowance as a tax exemption of up to £1,000 a year for individuals with trading income from self-employment, casual services such as babysitting or gardening, and hiring out personal equipment such as power tools. It has applied since 6 April 2017.

What matters is the gross figure, meaning everything customers paid you before costs. The guidance says that if your gross income for a tax year is more than £1,000, you must register for Self Assessment. A few details people miss:

• £1,000 or less: you do not need to tell HMRC, unless you cannot use the allowance or you have to register for Self Assessment for another reason. You must still keep a record of the income.
• More than £1,000: you can deduct the £1,000 allowance from your income instead of your actual expenses, but not both. If your costs were higher than £1,000, claiming expenses is usually better.
• Made a loss: the allowance cannot create a loss. If you want to claim relief for a loss, GOV.UK says you need to complete a tax return.
• You cannot use the allowance in a tax year if you have any trading income from a company you or someone connected to you owns or controls, a partnership you or someone connected to you is in, or your employer or your spouse's or civil partner's employer.
• Some people choose to file a return even when under £1,000, for example to pay voluntary Class 2 National Insurance contributions to help qualify for some benefits. You can still use the allowance in that case.

Selling your own possessions is usually not trading

If you are clearing out your wardrobe or selling furniture you no longer need, GOV.UK's guidance on online platforms says personal possessions are items that belong to you for your own use, and that selling them usually means you do not pay Income Tax on the money. A clear-out is not a business, even if you sell quite a lot of things in one go.

There is one exception to watch. If you sell a single personal possession for more than £6,000, you may need to pay Capital Gains Tax. GOV.UK says the same £6,000 figure applies to a set of items sold together, such as a set of chess pieces or matching ornaments, so you cannot split a set up to stay under it.

The line moves when you start buying things to sell. GOV.UK says you are probably trading if you sell goods you bought intending to sell for a profit, or goods you made, including items you make for a hobby.

How HMRC decides whether you are trading: the badges of trade

When it is not obvious, HMRC uses a set of tests known as the badges of trade, set out in its Business Income Manual. HMRC's own manual says no single badge settles the question; it looks at the overall picture. The nine badges are:

• Profit-seeking motive: did you set out to make a profit?
• The number of transactions: are the sales systematic and repeated?
• The nature of the asset: is it something that can only make money by being sold, rather than something you use or enjoy?
• Existence of similar trading transactions or interests: is it like a trade you already run?
• Changes to the asset: did you repair, modify or improve it to make it easier or more profitable to sell?
• The way the sale was carried out: does it look like how a business sells, or was it a one-off forced sale, such as needing cash in an emergency?
• The source of finance: did you borrow to buy the items, especially if repaying depended on selling them?
• Interval of time between purchase and sale: a quick, planned resale points to trading; holding something for years points away from it.
• Method of acquisition: things you inherited or were given are less likely to be part of a trade.

Digital products, commissions and content

Digital downloads you create, such as templates, presets, ebooks or courses, are things you made to sell, which GOV.UK puts on the trading side. Commissions are payment for a service you provide, which GOV.UK's working-for-yourself guidance also lists as a sign of trading.

GOV.UK adds that income from selling goods, providing services and creating online content is added together when you check it against the £1,000 allowance. Online content includes making videos, podcasts and social media influencing, and the income can include advertising and gifts or services you receive for promoting products. So £600 of digital downloads plus £500 of commissions in the same tax year is £1,100 of trading income, which is over the allowance.

If you are unsure, GOV.UK has a free checker, 'Check if you need to tell HMRC about additional income', and HMRC says you can contact it if you are not sure whether you are trading.

Over £1,000? Register as a sole trader by 5 October

If your trading income goes over £1,000, you register for Self Assessment as self-employed, which in practice makes you a sole trader. GOV.UK describes a sole trader as the simplest type of business to set up: you work for yourself, make the decisions and keep your profits after tax. It also means unlimited liability, so you are personally responsible for any debts the business runs up. You can trade under your own name or a trading name.

You can start selling before you register. The deadline is 5 October after the end of the tax year in which you went over £1,000. For the current 2026 to 2027 tax year (6 April 2026 to 5 April 2027), that is 5 October 2027. GOV.UK says telling HMRC after the deadline could lead to a penalty, and you can register earlier than you need to.

Once registered, you send a Self Assessment return each year. For the 2025 to 2026 tax year, GOV.UK gives the deadlines as 31 October 2026 for a paper return, and 31 January 2027 for an online return and for paying any tax owed. HMRC then uses your profit to work out whether you owe Income Tax and National Insurance.

Platforms now report sellers to HMRC

Part of the worry comes from a rule that started on 1 January 2024. UK digital platforms now have to collect sellers' details, such as name, address, date of birth and tax number, and report them with their income to HMRC each year by the following January.

Your details are not reported if you made fewer than 30 sales of goods in a calendar year and received less than 2,000 euros (about £1,700) for them. GOV.UK says a platform reporting you does not automatically mean you owe tax, and the platform must give you a copy of what it reported.

One thing to watch: platforms count the calendar year, January to December, while your tax year runs April to April. GOV.UK says to convert platform figures to the tax year before you compare them with the £1,000 allowance.

What records to keep, starting now

Whether you end up under or over £1,000, you need records. GOV.UK says sole traders must keep records of all sales and income, all business expenses, and their personal income, with proof such as receipts for goods and stock, bank statements, and sales invoices. You must keep them for at least 5 years after the 31 January submission deadline of the tax year they relate to.

From the 2024 to 2025 tax year, cash basis is the default method, which means you record income when the money arrives and expenses when you pay them. A simple habit makes the whole thing painless:

• Keep side income in a separate bank account so every sale is in one place.
• Log each sale with the date, what it was and the amount, and save the receipt for every cost.
• Check your running total against £1,000 for the tax year (6 April to 5 April), not the calendar year.
• Download your platform and payment statements before you close any account.
• Put a reminder in your calendar for 5 October each year.

Selling from a single page

If you sell digital products or commissions from your bio, OneSol gives you a free link-in-bio page, and on Pro ($9/month) you can take payments through your own Stripe or PayPal account, so the money goes straight to you and your payment statements are all in one place for your records. OneSol does not file taxes, collect VAT or give tax advice.

This is general information, not tax or legal advice, and your own situation may differ. If you are unsure, check with HMRC or an accountant.