If you sell through Amazon, eBay, Etsy, Vinted or another online marketplace, you may have heard about online marketplaces reporting sellers to HMRC.
The rules have attracted plenty of attention, especially amongst people worried that selling a few unwanted items might result in an unexpected tax liability.
However, the reality is less dramatic.
There is no new tax on selling online. Instead, new reporting rules give HMRC much greater visibility over income earned through digital platforms.
Online marketplaces are now required to obtain information about certain sellers and report it to HMRC. This could include details of how much you have received and the number of transactions you have made.
As a result, for those established e-commerce businesses, this makes accurate bookkeeping and tax reporting more important than ever.
In this guide, we explain why online marketplaces are reporting sellers to HMRC, what information HMRC receives and, most importantly, when online sales actually become taxable.
Why are online marketplaces reporting sellers to HMRC?
The reporting rules for digital platforms took effect in the UK from 1 January 2024.
Under the rules, certain online marketplaces must collect information about their sellers and report it to HMRC each year.
HMRC provides detailed guidance explaining how the digital platform reporting rules apply to online marketplaces with people selling goods or services online. Additionally, HMRC has published guidance for sellers operating on digital platforms.
The rules form part of a wider international initiative developed by the Organisation for Economic Co-operation and Development (OECD). Its Model Reporting Rules for Digital Platforms are intended to improve the information available to tax authorities about income earned through digital platforms.
The benefit for HMRC, the benefit is obvious.
Online marketplaces can hold significant amounts of information about their sellers. Reporting this information allows HMRC to compare marketplace activity with information already reported through Self Assessment and other tax records.
Therefore HMRC has much greater visibility over online businesses that may not be declaring all of their income.
However, one distinction is important:
Online marketplaces reporting sellers to HMRC does not mean that every seller being reported has tax to pay.
The reporting rules determine what information platforms provide to tax authorities. The normal UK tax rules determine whether you actually owe tax.
Do Amazon, eBay, Etsy and Vinted report sellers to HMRC?
Large online marketplaces - for example Amazon can fall within the digital platform reporting regime .However, the international nature of the rules means the reporting process is more complicated than simply saying that every marketplace reports directly to HMRC.
A UK Reporting Platform Operator generally has reporting obligations to HMRC where it is UK resident or, in certain circumstances, incorporated or managed in the UK.
An overseas platform with UK sellers is not automatically a UK Reporting Platform Operator. Consequently, it may instead have reporting obligations under equivalent rules in another participating country.
Consequently, information relating to UK sellers can then be exchanged between tax authorities.
The important point for a UK seller is that using an overseas platform does not necessarily mean that information about your sales will remain outside HMRC’s remit.
What information can online marketplaces report?
Digital platforms can hold considerably more information than simply the amount transferred to your bank account.
Depending on the circumstances, information collected about sellers can include:
Platforms are also required to provide sellers with a copy of the information they report.
For an established e-commerce business, this creates an obvious reason to make sure that your accounting records can be reconciled to the information held by the marketplaces you use.
Is there a £1,700 tax-free allowance for selling online?
No.
This is possibly the largest misconception surrounding the new reporting rules.
You may have seen references to 30 transactions or €2,000, which is roughly £1,700.
Broadly speaking, where someone selling goods makes fewer than 30 sales and receives less than €2,000 during the calendar year, their details do not have to be reported under this particular rule.
However, this is a reporting exemption, not a new tax allowance.
You could be below the platform reporting threshold and still have a tax obligation.
Equally, your information could be reported to HMRC without you having any tax to pay.
Importantly, the marketplace reporting rules and the rules determining whether you owe tax are two separate things.
What about the £1,000 trading allowance?
This is another figure that is frequently confused with the platform reporting rules.
The UK tax rules have a trading allowance of up to £1,000 of gross trading income in a tax year.
This is completely separate from the €2,000 platform reporting threshold.
For example, imagine you regularly buy products and resell them online.
Consequently, if your gross trading income goes above £1,000 during the tax year, you may need to tell HMRC about the business even if your details have not been reported under the digital platform rules.
It is therefore important not to apply the marketplace reporting threshold to determine whether you are required to declare your income.
Does selling something on eBay or Vinted mean you have to pay tax?
Not necessarily.
There is a big difference between selling your own unwanted belongings and trading.
If you clear out your wardrobe and sell some old clothes for less than you originally paid for them, that does not suddenly you are running an e-commerce business.
The position can be very different if you are buying or making products with the intention of selling them for a profit.
For example
Selling your old iphone
You bought an iphone for your personal use and later sell it when you upgrade.
That would not normally amount to trading.
Buying phones to resell
You deliberately buy refurbished iphones because you believe you can sell them online for more than you paid.
That appears to more like a trading activity rather than getting rid of old personal belongings.
Therefore the tax treatment depends on what you are actually doing, not simply which platform you use to sell the item in question.
What if online selling starts as a side hustle?
This is where problems can arise.
Increasingly, an e-commerce business does not require a warehouse, employees or a limited company structure before it becomes taxable.
You might start by selling a few products from home.
You might start by selling a few products from home. Consequently, sales increase and you begin acquiring stock specifically to resell.
Then you open an Amazon, Etsy or eBay store and start making regular sales.
Eventually what started as an experiment might become a genuine trade.
As a result, your activity amounts to trading, the profits can be taxable and you may have obligations to register with HMRC.
Therefore, do not wait for correspondence from HMRC before considering your tax position.
Will HMRC know how much I have sold online?
Increasingly the answer is yes.
One of the main objectives of online marketplaces reporting sellers to HMRC is to provide tax authorities greater transparency over income generated through digital platforms.
As a result, HMRC can receive information about amounts earned by sellers and the number of transactions completed.
Consequently, that information can potentially be compared with tax returns and existing information held by HMRC.
However matters become complicated, because the figures supplied by a platform will not necessarily equate to those disclosed by you to HMRC..
Your sales do not equate to your profit and an e-commerce business may have allowable costs including:
This underlines the importance of maintaining good business records and accurate financial reporting to HMRC.
Platform reports use calendar years
There is an additional potential source of confusion.
This is because Digital platforms generally collect and report seller information by calendar year .Conversely, UK individuals normally report taxable income by the tax year which ends on 5 April.
Therefore any report provided by a digital platform cannot therefore simply form the basis of any disclosure to HMRC.
Consequently, you'll need proper accounting records to report the necessary details to HMRC.
What if I sell via several platforms?
This is especially important for modern e-commerce businesses who might sell via:
Looking at each platform separately can provide a misleading picture.
This is because your tax obligations generally relate to the overall business
For example, you cannot normally treat an Amazon business and an eBay business as completely separate entities simply because sales go via different platforms if they are actually part of the same trade.
The same issue becomes particularly important when monitoring VATable turnover for VAT registration.
What happens if HMRC discovers undisclosed online sales?
HMRC receiving marketplace information does not automatically mean it will open an enquiry into your business.
However, if the information HMRC holds indicates that someone has been trading on an online marketplace without disclosure the income, HMRC may ask questions.
Where income should have been disclosed in previous tax years, it may be necessary to make a disclosure to HMRC.
Depending on the circumstances, this could involve:
The correct approach depends on why the income was not originally disclosed and how far back the issue arises.
Submitting a voluntary disclosure to HMRC will often put you in a better position before HMRC's makes a discovery and you a re forced to make a prompted disclosure.
Don’t forget about VAT
Income Tax or Corporation Tax is only part of the picture.
A growing e-commerce business also needs to monitor its turnover for VAT purposes.
This becomes more complicated where you sell:
Furthermore, the digital platform reporting threshold has no bearing on whether your business needs to register for VAT.
This is particularly important for businesses approaching the VAT registration threshold. Looking only at the money received into your bank account after Amazon or other marketplace fees have been deducted can give you the wrong answer.
What about VAT on online marketplace sales?
Digital platform reporting is not the only way HMRC is using online marketplaces to tackle tax non-compliance.
Separate VAT rules implemented in 2016 can make an online marketplace jointly and severally liable for VAT where this should have been paid by certain overseas sellers using its platform.
Furthermore, where appropriate HMRC can issue a notice to an online marketplace where an overseas business has failed to meet its UK VAT obligations. The marketplace may then be required to secure compliance from the seller or prevent it from continuing to trade via their platform.
In 2026, the government issued a consultation on proposals to extend online marketplace VAT liability to sales made by UK businesses.
HMRC is of the opinion that widescale VAT non-compliance by UK businesses trading through online marketplaces continues to exist. As a result, HMRC estimates the potential VAT lost runs into hundreds of millions of pounds.
The proposals could make online marketplaces responsible for accounting for VAT on certain sales they facilitate for UK businesses as well as overseas sellers.
At the time of writing, these are proposals rather than the current rules for UK sellers.
Nevertheless, they demonstrate HMRC is increasingly looking to online marketplaces for information about their sellers, but also seeking to improve tax compliance across the e-commerce sector.
What does this mean for online sellers?
The important change is not a new tax on Amazon, eBay, Etsy or Vinted sellers it is new information becoming available to HMRC.
For someone occasionally selling unwanted personal possessions, that may make very little difference.
However, for someone running an undeclared e-commerce business, it can make a very big difference.
Conversely, for those established e-commerce businesses, digital platform reporting forms part of a much wider shift towards greater tax transparency and marketplace accountability.
As a result, accurate bookkeeping, closely monitoring your VAT position and reporting the correct income are therefore becoming more vital than ever.
What should established e-commerce businesses do?
If you already run an Amazon, Shopify, eBay or other online business, the reporting rules make good record keeping even more important.
Your accounting procedures should be capable of reconciling the money received via different platforms with the sales correctly reported in your accounts.
However, this is not always straightforward. This is because Amazon and other marketplaces can deduct fees, advertising costs, refunds, fulfilment charges and other amounts before transferring money to your bank.
Therefore simply treating the amount arriving in the bank as sales can produce the wrong result.
Good e-commerce bookkeeping should separately identify gross sales, refunds, marketplace fees and other costs. Consequently this should also allow you to monitor your VAT position as your business grows
Need help with your e-commerce tax?
Selling through Amazon, Shopify, eBay, Etsy or multiple platforms can quickly make your tax affairs more complicated.
We work with UK e-commerce businesses on everything from bookkeeping and annual accounts to VAT, international sales and tax planning.
If your online sales are growing, or you are concerned that income from earlier years may not have been reported correctly, speak to us before it becomes a wider issue.
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
Alternatively, please feel free to complete our Business Questionnaire here.