Received an HMRC Letter About Your Online Selling Income?

An HMRC letter about eBay, Etsy, Vinted or similar income is usually a 'nudge' letter prompted by data HMRC has received from the platform, not the start of a formal enquiry. It asks you to review whether you should have declared trading income and to correct matters if so.

These letters differ from a Schedule 36 information notice: they carry no immediate legal compulsion, but ignoring one where trading income was in fact undeclared removes the chance to make an unprompted disclosure, which generally attracts a lower penalty than waiting for HMRC to intervene formally.

Since the Platform Operators (Due Diligence and Reporting Requirements) Regulations 2023 came into force, platforms operating in the UK must collect seller information and report certain sales data to HMRC annually. This gives HMRC a much clearer picture of who is selling, how often and for how much.

HMRC then matches this data against Self Assessment records. A seller with substantial platform turnover and no corresponding tax return, or one below the trading allowance threshold reported on their return, is more likely to receive a letter, regardless of the platform used, whether that is eBay, Etsy, Vinted, Depop, Amazon, a Shopify store or TikTok Shop.

HMRC can ask you to confirm whether you were trading, and, if a formal check follows, can request supporting records such as platform statements, bank records, purchase invoices for stock, and postage or fee records reasonably needed to check your position.

It cannot assume every platform sale is taxable income without evidence. Genuine personal sales of possessions you no longer want are generally not trading, and the onus is on demonstrating that distinction with a clear, honest account of your selling pattern rather than on HMRC proving otherwise from the outset.

Start by separating your platform activity into genuine personal disposals and anything closer to a trading pattern: buying stock, sourcing items to resell, running multiple listings regularly or operating a shopfront. Our guides for [Etsy sellers](/industries/etsy-sellers), [eBay sellers](/industries/ebay-sellers), [Vinted and Depop resellers](/industries/vinted-and-depop-resellers), [Amazon FBA businesses](/industries/amazon-fba-businesses), [Shopify store owners](/industries/shopify-store-owners) and [TikTok Shop sellers](/industries/tiktok-shop-sellers) set out how trading is usually assessed in each context.

Pull together your sales and fee data from each platform for the relevant years before deciding how to reply. Our broader [selling online tax guide](/guides/selling-online-tax-guide) explains how the trading allowance, registration thresholds and VAT rules fit together across marketplaces.

A straightforward nudge letter, answered promptly with a clear explanation and no undeclared trading found, can be resolved within weeks. Where trading income was genuinely undeclared, correcting it through the Digital Disclosure Service can take longer, particularly across several tax years.

It ends either with HMRC accepting no further action is needed, or with a completed disclosure covering tax, interest and any penalty for the years affected. In some cases, a poor or ignored response can lead to a formal compliance check opening instead.

Where trading profits should have been declared and were not, HMRC can assess additional tax, charge late-payment interest, and consider a penalty under Schedule 24 FA 2007 or the failure-to-notify rules in Schedule 41 FA 2008, depending on the facts.

The behaviour matters: careless failure to realise the trading allowance had been exceeded sits at the lower end of the penalty range, while deliberately concealing regular reselling activity sits much higher. An unprompted disclosure, made before HMRC's letter or before it escalates, generally reduces the penalty further than a prompted correction made only after being asked.

Reconstructing several years of platform sales, fee statements and stock costs takes real time, and getting the trading allowance and VAT position wrong can be costly to unwind later. Even a short review of your position can involve meaningful accountancy fees.

Tax investigation insurance can cover eligible professional costs of responding to an HMRC letter or a subsequent enquiry, keeping your out-of-pocket exposure predictable. See our [fees](/fees) page for how this cover interacts with our standard charging.

A common mistake is ignoring the letter because it does not look like a formal enquiry, then losing the chance to make an unprompted disclosure if HMRC later opens a check. Another is assuming platform income is automatically tax-free because it was 'just a side hustle'.

Sellers also sometimes conflate turnover with profit when checking the trading allowance, or overlook that VAT registration is assessed on turnover regardless of whether the trading profit itself is modest. Reviewing figures properly before replying avoids both under- and over-stating your position.

Consider someone who began selling clothes on Vinted casually, then started sourcing stock from wholesalers to resell through a small Shopify store alongside their day job. They receive an HMRC letter referencing Vinted sales data and asking them to review their position.

Reviewing the pattern shows the early Vinted sales were genuinely clearing out a wardrobe, but the Shopify activity, buying stock specifically to resell at a margin, is trading. Their adviser calculates trading profit from the point the activity became commercial, checks it against the trading allowance and VAT threshold, and prepares a disclosure covering only the trading period rather than the earlier personal sales.

Because the disclosure is made before HMRC opens a formal enquiry, it is treated as unprompted, and the penalty proposed reflects a careless rather than deliberate failure, since the seller had not previously understood the trading allowance applied across platforms.