You sold a few bits on Vinted. Then a few more on Depop. Your PayPal balance starts to look healthier than expected and a creeping thought arrives: do you need to tell HMRC about this?

It is one of the most common questions UK side hustlers ask, but the answer is not just a single income figure. You first need to separate selling personal belongings from trading for profit. Only then can you work out whether the trading allowance, Self Assessment and record keeping rules need your attention.

What Is the HMRC Trading Allowance?

The trading allowance can cover up to £1,000 of gross trading income in a tax year. HMRC says that if annual gross trading income from one or more trades is £1,000 or less, you may not need to tell HMRC, although there are circumstances where you still need to register or declare the income.

The key word is gross. Gross trading income means income before expenses are taken off. If you sell £1,200 of items you bought to resell and spend £400 on stock, the gross trading income is still £1,200.

HMRC explains the allowance in its trading and property allowance guidance.

The allowance is not a profit threshold. When you are deciding whether gross trading income is over £1,000, you look at sales income before deducting stock, fees, postage or other costs.

Selling Personal Items Is Different

There is a big difference between clearing out your own wardrobe and buying stock to flip online. If you are selling personal possessions that you originally bought for your own use, you are usually not trading.

HMRC says people selling personal possessions probably do not have to pay Income Tax on those sales. Capital Gains Tax can sometimes become relevant for higher-value personal possessions, including certain items sold for more than £6,000, but that is a different question from ordinary side-hustle trading income.

HMRC's online platform income guidance explains the distinction between personal possessions and taxable online activity.

When Does Online Selling Become Trading?

If you start buying items specifically to sell at a profit, or making goods to sell, the position changes. You may be trading even if you call it a side hustle and even if the activity is spread across several platforms.

For online resellers, the important point is not whether the sales happened on Vinted, Depop, eBay, Etsy or through social media. It is what you are actually doing.

If you sell on Vinted and want the platform-specific version, read our guide on how much you can sell on Vinted without paying tax.

The Badges of Trade

HMRC looks at the facts when deciding whether activity amounts to trading. One way this is analysed is through indicators often called the badges of trade.

PROFIT Profit motive: are you trying to make money rather than simply clear space at home?
REPEAT Repeated transactions: are you selling regularly and in an organised way?
TIMING Length of ownership: are items bought and sold again quickly?
CHANGE Modification: are you buying items, improving or adapting them, then selling them?
SOURCE Acquisition: were the goods bought or sourced specifically for resale?

No single badge decides every case on its own. HMRC considers the overall picture, which is why a one-off clear-out and a repeat buying-to-resell activity can be treated very differently.

HMRC summarises the badges of trade in its Business Income Manual.

Marketplace Reporting Rules

Online marketplaces may collect and report information about sellers to HMRC under digital platform reporting rules. This can apply to platforms that connect sellers with buyers for goods or services.

For sellers of goods, HMRC says details are not reported where you make fewer than 30 sales in a calendar year and receive less than EUR2,000 for those sales. If a platform does report information about you, that does not automatically mean you owe tax. It means the platform data may help HMRC and you understand the activity taking place.

HMRC explains the seller side of the rules in its digital platform guidance.

Platform reporting and tax rules are not the same threshold. Marketplace reporting is about information sent to HMRC. Your tax position still depends on whether you are trading and how the normal tax rules apply.

What to Do If Your Trading Income Is Over the Allowance

If your online selling is trading and your gross trading income is over the trading allowance, it is time to get organised.

  • Check whether you need to register for Self Assessment.
  • Keep records of sales across every platform you use.
  • Track platform fees, payment fees, postage and stock costs.
  • Keep invoices, receipts and payout reports.
  • Work out whether actual expenses or the trading allowance gives the better result where a choice is available.
  • Plan for the usual filing and payment deadlines that apply to your tax return.

If your sales are spread across several apps and payment processors, our guide on tracking multi-platform sales for one tax return is a useful next read.

Trading Allowance or Actual Expenses?

Once you are reporting taxable trading income, one of the practical decisions is whether to use the trading allowance as a flat deduction or claim actual allowable expenses instead, where the rules allow that choice.

For a low-cost side hustle, the allowance may be attractive. For a reseller with stock costs, platform fees, postage, packaging and software costs, actual expenses may produce a better result. The answer depends on your numbers, not just the platform you sell on.

Good bookkeeping makes that comparison much easier. Our bookkeeping service can help online sellers keep sales, fees and costs in one clearer picture.

When to Talk to an Accountant

A side hustle starts to feel very different once it becomes regular, profitable and spread across multiple channels. Getting help early can stop the records becoming a mess and help you make better decisions about expenses, registration and business structure.

An accountant can help you review whether you are trading, compare actual expenses with the trading allowance, check your Self Assessment position and think through whether staying as a sole trader still suits the business.

At Simplr Accounting, we work with online sellers across major UK marketplaces. Start with our online seller accounting page or book a free discovery call.

Quick Recap

  • Selling personal possessions is usually different from trading.
  • Buying or making goods to sell for profit can point towards trading.
  • The trading allowance focuses on gross trading income, not profit.
  • Marketplace reporting does not automatically mean tax is due.
  • If online selling is becoming a real business, keep records early.
Further reading