Selling online to clear some space turned, quietly, into a small business. The letter from HMRC that followed was less a threat than a prompt to look properly.
It began innocently. You cleared the wardrobe, listed a few things on Vinted, and it felt good to see them go rather than gather dust. Then you got a feel for what sold, started picking pieces up cheaply to list at a profit, and before long there was a steady trickle of parcels going out from your Kingston flat most weeks. You never thought of it as a business. It was pin money, a hobby that happened to pay. So the letter from HMRC, noting that it had received information about your income from online platforms and inviting you to check whether you needed to declare anything, lands with a jolt. You are not even sure where you stand, which is exactly the uncertainty worth clearing up.
At a glance
- Since 2024, platforms such as eBay, Vinted, Etsy and Airbnb report seller information to HMRC each January.
- Being reported is not the same as owing tax. Selling your own possessions at a loss is not trading.
- If your gross trading income exceeds the £1,000 trading allowance, you must register for Self Assessment, even if little or no tax turns out to be due.
- The platform reporting trigger, 30 sales or roughly £1,700 of goods, is a reporting threshold, not a tax-free allowance.
- Registration is due by 5 October after the tax year concerned, and a proposed £3,000 reporting threshold is not yet law.
Do I have to pay tax on my eBay or Vinted sales?
Only if you are trading and your gross trading income exceeds the £1,000 trading allowance. Selling your own used possessions for less than you paid is not trading and is generally not taxable. But buying or making things to sell at a profit is, and once you pass £1,000 gross you must register for Self Assessment and file a return, even if little tax is ultimately due.
Two questions people usually ask next:
Is selling my own used clothes taxable?
Generally no. Selling personal possessions you no longer want, usually for less than you paid, is not trading and is not taxable. A separate rule can apply to a single item sold for more than £6,000, but that is rare in everyday second-hand selling.
Why has HMRC written to me about my online income?
Because the platform you sell on now reports seller data to HMRC each January, and its figures did not clearly match your tax records. The letter is a prompt to check your position, often sent in large batches. It is not, in itself, an accusation of wrongdoing.
Those are the headlines. How one Kingston seller’s wardrobe clear-out quietly turned into a trade, and what the letter really asked of them, is where the useful detail lies.
What actually changed
The first thing to understand is what the letter does and does not mean. The tax rules on extra income have not changed. What has changed is how much HMRC can see.
Since the start of 2024, online platforms have been required to collect details of their sellers and report them to HMRC once a year, in January. The list is long and familiar: eBay, Vinted, Etsy, Depop, Airbnb, Uber and more. HMRC then matches that data against tax returns, and where the two do not line up, a letter follows. These are often sent in large batches, which is why yours may feel oddly generic. It is not an accusation. It is a prompt, generated because a platform reported activity that HMRC could not immediately reconcile with what it holds.
That distinction matters, because the natural reaction to an HMRC letter is either to panic or to ignore it, and neither is the right response here.
Reported is not the same as taxable
Plenty of people caught by these letters owe nothing at all. If you are simply selling your own used possessions, the clothes that no longer fit, the pram the children grew out of, and selling them for less than you paid, you are not trading and there is generally no income tax to worry about. Clearing your loft is not a business, however many parcels it generates.
There is a separate rule for personal possessions sold at a gain, which only bites where an individual item fetches more than £6,000, so for most second-hand selling it does not arise. The point to hold on to is that the platform reporting threshold, the 30 sales or roughly £1,700 that obliges a platform to report you, is not a line above which tax is automatically due. It is simply the point at which your data gets passed on. Whether anything is owed depends on something else entirely: whether what you are doing has become a trade.
When a hobby becomes a trade
The law looks at the nature of the activity, not the label you give it. The tell-tale signs, sometimes called the badges of trade, are easier to recognise than their name suggests. Are you buying things specifically to sell them on at a profit? Are you making items to sell? Is there regularity and system to it, rather than the occasional clear-out? Is the intention to make money?
The Kingston seller crossed that line without noticing the moment it happened. The wardrobe clear-out was not trading. Sourcing stock to resell, week after week, with an eye on the margin, was. That is the shift the letter is really asking about, and once it is seen clearly the answer is usually obvious, even if it was not before.
The £1,000 line, and the deadlines
Once an activity is a trade, the trading allowance is the figure that matters. If your gross trading income, before any expenses, is £1,000 or less in a tax year, you generally have nothing to report. Above it, you must register for Self Assessment and file a return, even if, after deducting your costs, there is little or no tax to pay. Registering and paying are two different obligations, and the first applies regardless of the second.
Miss the registration deadline and a failure-to-notify penalty can apply, calculated on the tax owed. It is avoidable, but only if the obligation is recognised in time, which is the whole reason these letters are worth reading rather than filing under the kettle.
The people who come to us with one of these letters are rarely trying to hide anything. They simply never registered the moment their clear-out turned into a sideline. Once we look at it together, it is usually straightforward: work out whether it is a trade, tidy up the records, register if needed, and deal with any earlier years properly. The letter feels frightening. The answer, more often than not, is calm and quick.
Donovan Crutchfield, ACA, Area Managing Partner, Xeinadin Richmond
If a letter has already arrived
The worst response is silence. These letters generally ask you to reply within a set period, and engaging promptly keeps you in the best position. Where earlier years should have been declared and were not, coming forward voluntarily, through HMRC’s disclosure routes, typically reduces the penalties well below what applies when HMRC has to come to you.
Good records are your friend here. If you have kept a note of what you bought, what you sold, and the platform and postage costs in between, working out the real position is quick. If you have not, it can be reconstructed, and it is worth doing properly rather than guessing. This is exactly the kind of situation where a short piece of personal tax planning advice saves far more than it costs, both in penalties avoided and in worry.
Getting it straight, once
The Kingston seller was, in the end, trading, and modestly profitable. Registering, filing, and settling a small bill turned out to be far less painful than the letter had suggested. What changed for good was the setup: a separate account for the selling, simple bookkeeping through a cloud accounting app that logged each sale and cost as it happened, and a clear line between the personal clear-outs and the genuine trade.
If any of this feels familiar, whether it is reselling, letting a room on Airbnb, which brings its own property considerations, or freelance work through an app, it is worth getting the position straight once rather than living with the uncertainty. Our personal tax planning and business advice teams help people across Kingston, Richmond and Surrey work out where they stand and, just as importantly, set things up so the question does not come round again.
More common questions
What is the £1,000 trading allowance?
It is a tax-free allowance for trading income. If your gross trading income for the year is £1,000 or less, you usually need not report it. Above £1,000, you must register for Self Assessment and file a return, though you can then choose to deduct either the allowance or your actual expenses.
What is the difference between the reporting threshold and a tax-free allowance?
They are easily confused. The platform reporting threshold, 30 sales or roughly £1,700, is simply the point at which a platform must pass your data to HMRC. The £1,000 trading allowance is the tax-free figure. You can be reported without owing anything, and you can owe tax without ever reaching the reporting trigger.
I have not declared income from previous years. What should I do?
Address it sooner rather than later. Coming forward voluntarily through HMRC’s disclosure routes usually results in lower penalties than waiting for HMRC to act. Gather what records you have and take advice, so the disclosure is accurate and the position is closed cleanly.
Key takeaways
- A letter means HMRC has data from a platform, not that you necessarily owe tax. The two are separate.
- The real question is whether your selling has become a trade. Buying or making things to sell for profit usually means it has.
- Once trading income passes £1,000 gross, register for Self Assessment by 5 October and file by 31 January, even if the tax due is small.
ABOUT THE AUTHOR
Donovan Crutchfield, ACA, is Area Managing Partner at Xeinadin Richmond. He helps individuals and owner-managed businesses across Kingston, Richmond upon Thames, Twickenham and the wider South West London and Surrey area understand where they stand with HMRC and plan with confidence. Connect with Donovan on LinkedIn
This case study is a composite, drawn from situations we see regularly across the area. It does not describe a single identifiable client, and any resemblance to a particular person or business is coincidental. It is general information, not advice for your circumstances. Allowances, thresholds and rules change and depend on the detail of your own position, so figures should be confirmed as current before you act. For guidance tailored to you, please speak to us directly.
