Tax for people earning online: Etsy, eBay, Amazon and beyond

Digital platforms, Etsy, eBay, Amazon, Vinted, Depop, Airbnb, TikTok Shop and others, report seller income and identity details to HMRC each year under the international platform reporting rules. The first reports covering 2024 landed with HMRC in early 2025, and letters to sellers followed.

This does not create a new tax. It removes the gap between what people earn online and what HMRC can see. If you were trading and did not declare it, correcting it voluntarily now costs far less than waiting for the letter.

Selling your own possessions is not trading, however much they raise. Buying or making goods to sell at a profit is trading from the first sale. HMRC applies the badges of trade: profit motive, how often you sell, whether you modify goods to sell them, how you source stock and how the activity is organised.

Individuals have a £1,000 trading allowance. Above that, income must be reported. Once you trade through a limited company, there is no allowance, every sale is company income and the company files accounts and a CT600 whatever the profit.

The single most common error in online accounts is treating the platform deposit as sales. It is not. It is gross sales less commission, advertising, refunds, shipping labels, reserves and sometimes VAT. Report the gross figure and show each cost separately, or your turnover is understated, your VAT threshold test is wrong and your margins are invisible.

Rebuilding settlement reports monthly is dull work, which is why so many sellers skip it, and why so many discover they crossed the VAT threshold two quarters ago.

Registration is required once taxable turnover in any rolling twelve months exceeds £90,000, or when you expect to exceed it in the next 30 days alone. For many marketplace sales the platform is the deemed supplier and accounts for VAT itself, but sales through your own website are always yours.

Selling abroad adds layers: storing stock in another country usually triggers registration there from the first sale, EU consumer sales run through the One Stop Shop, and digital products to consumers follow where the customer is. Map the flows before the volume arrives, not after.

Below roughly £30,000 to £40,000 of profit the tax saving over sole trader status is usually modest against the extra admin. Above that, and especially where you retain profit to buy stock or invest in growth, a company at 19% to 25% corporation tax with a planned salary and dividend mix normally wins.

Companies also give you a cleaner platform for growth: limited liability, a structure lenders and investors recognise, the ability to bring in a co-owner and a share scheme for a first hire. Incorporating mid-stream has its own costs, so model it before you file the paperwork.

Sellers who scale past a million share a habit: they know their margin by channel and product, not blended. Amazon at 12% contribution and your own site at 38% are different businesses, and averaging them hides where the growth should go.

The finance work that supports that is a monthly close within days of month end, contribution margin by channel, a cash forecast that respects stock and processor holds, and corporation tax planned around the £50,000 and £250,000 marginal relief thresholds rather than discovered nine months later.