Etsy tax in the UK is simpler than it sounds. If you make things, or create digital products, to sell on Etsy, that is trading. The first £1,000 of sales each tax year is covered by the trading allowance; above that you register for Self Assessment and pay tax on your profit, not on your sales.
The short answer
- Making or buying things to sell at a profit is trading, even as a hobby on the side.
- If your Etsy sales before costs are £1,000 or less in a tax year (6 April to 5 April), you generally do not need to tell HMRC.
- Over £1,000, register for Self Assessment and take off either the £1,000 allowance or your real costs, whichever is bigger.
Is selling on Etsy trading?
GOV.UK says that if you buy or make goods to sell at a profit, you are likely to be trading and will have to pay tax on your profits. That covers handmade items, printables and other digital downloads, and supplies you buy in to sell on. Selling a few of your own unwanted things is different, but that is rarely what people use Etsy for.
The £1,000 trading allowance
The allowance uses your gross income: your total sales before Etsy fees, materials or postage. If that is £1,000 or less in the tax year, you generally do not need to tell HMRC. Over £1,000, you need to register for Self Assessment by 5 October after the tax year ends and file online by 31 January. See Self Assessment for online sellers for the dates and penalties.
Does Etsy report you to HMRC?
Online marketplaces, Etsy included, collect sellers’ details and report them to HMRC by the January after each calendar year. You are not reported if you made fewer than 30 sales and received less than 2,000 euros (about £1,700) in the year. Being reported does not mean you owe tax; it means HMRC can see your sales.
Costs makers can take off
Instead of the £1,000 allowance you can take off your real business costs. For a maker that usually means:
- Materials and supplies you use in what you sell, and stock you buy to sell on.
- Etsy fees and payment processing fees (our Etsy fees guide lists them).
- Postage, packaging and labels for orders.
- The business part of your phone and internet bills.
- Working from home: a flat £10, £18 or £26 a month if you work at home 25 to 50, 51 to 100 or 101+ hours a month.
- Business mileage: 45p a mile for the first 10,000 miles in 2025 to 2026 (55p from 6 April 2026), for example driving to buy supplies or to the post office.
Our guide to allowable expenses for online sellers has the full list and what you cannot claim.
Worked example
| Amount | |
|---|---|
| Etsy sales in the tax year | £3,200 |
| Materials | £600 |
| Etsy and payment fees | £450 |
| Postage and packaging | £300 |
| Working from home (30 hours a month, 12 months at £10) | £120 |
| Total costs | £1,470 |
| Profit using real costs | £1,730 |
| Profit using the £1,000 allowance | £2,200 |
Here the real costs give the lower profit, so claiming expenses is better. You cannot use both. Whether the profit is taxed depends on your other income; Income Tax only starts once your total income is above your Personal Allowance (£12,570 in 2025 to 2026 for most people).
Keep track as you go
Record each order, its fees and your material costs as you go, and keep receipts for at least 5 years after the 31 January deadline. The Etsy seller profit tracker does the sums for each order and the tax year, and the free Etsy fee calculator shows what Etsy takes on one sale. If your sales grow large, read about VAT for online sellers too.
Official sources
This guide is general information, not tax advice. Rules can change and your situation may be different, so check GOV.UK or ask an accountant. Figures checked on GOV.UK on 13 November 2026.
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