Online Selling in the UK: Is It a Hobby or a Business for HMRC?

Name: Makesworth Accountants
Price range: $$

Selling online through platforms like eBay, Vinted, Etsy, Depop, Amazon Marketplace, or Facebook Marketplace has become extremely common in the UK. Some people sell casually to clear out unwanted items, while others buy and sell regularly to earn extra income.

But here’s the important part:

HMRC may treat you as a trader, even if you think you’re just doing it as a hobby.

So how do you know whether your online selling counts as a business or simply a hobby?

Let’s break it down clearly.

When Online Marketplaces Consider You a Trader

Many UK online marketplaces, including eBay, classify sellers as traders if they:

List items frequently
Sell in bulk
Buy items specifically to resell
Appear to be selling with the intention of making profit

When a seller is treated as a trader, the platform may apply:

Additional selling fees
Different rules and protections compared to private sellers

Important: Platforms Must Report Some Sellers to HMRC

Under UK reporting rules, online platforms are required to share certain seller data with HMRC when the activity reaches a specific level.

For example, if you complete:

30 or more sales transactions, OR
Total sales exceed around £1,707 (after fees)

…then platforms such as eBay may report your sales activity to HMRC as trading.

Once reported, HMRC expects you to declare this income through a Self Assessment tax return (if applicable).

Platforms usually notify sellers when their information has been shared.

Does the £1,707 Threshold Mean You Don’t Pay Tax Below It?

No — and this is where many people get confused.

The £1,707 reporting threshold is not the same as the tax-free limit.

HMRC uses a separate rule called the Trading Allowance.

HMRC Trading Allowance: The Real Tax-Free Limit

The UK trading allowance allows you to earn up to £1,000 per tax year in gross income from:

Online selling
Casual services
Side gigs such as babysitting, gardening, dog walking, etc.

If your gross trading income is under £1,000, you usually:

✅ Don’t pay tax
✅ Don’t need to declare it

But if you earn more than £1,000, you may need to:

Register for Self Assessment
Declare your income
Pay tax depending on your profit

How HMRC Decides: Business vs Hobby

Many people assume a hobby becomes a business only when earnings reach a certain amount.

But HMRC does not decide based purely on money.

Instead, HMRC looks at the overall nature of your activity.

The challenge is that many online sellers fall somewhere in the middle — not fully casual, but not a full-time business either.

The “Badges of Trade” HMRC Uses

To decide whether you’re trading, HMRC often uses a set of indicators called the Badges of Trade.

These are not strict rules, but they help HMRC judge the intent and behaviour behind your selling activity.

HMRC lists the badges as:

Profit-seeking motive
Number of transactions
Nature of the asset
Similar trading activity or interests
Changes made to the asset
How the sale was carried out
Source of finance
Time between purchase and sale
Method of acquisition

Key Signs That HMRC May Treat You as a Business

1. You Are Selling to Make a Profit

This is the strongest indicator.

HMRC is more likely to treat you as a trader if you:

Buy items specifically to resell
Adjust pricing to maximise profit
Promote your products
Grow your sales over time
Operate like a small business

If you consistently make losses with no realistic plan to become profitable, HMRC may view the activity as more of a hobby.

2. You Sell Frequently and Regularly

A one-off sale is usually not trading.

But if you sell regularly — even part-time — HMRC may view it as a trade.

Even isolated transactions can count as trading in some cases, especially if the deal looks commercial or speculative.

A well-known tax case often quoted is Rutledge v CIR (1929), where a person bought and sold one million rolls of toilet paper in one transaction — and it was treated as trading.

3. The Type of Items You Sell Matters

Some items naturally look like trading stock, such as:

Bulk electronics
Mobile phones
New products purchased for resale
Materials bought to create products

Meanwhile, selling personal items like:

Used furniture
Old electronics
Personal vehicles
Household goods

…is more likely to be considered casual selling (especially if the items were originally bought for personal use).

4. How Long You Owned the Item

HMRC also considers the time between purchase and sale.

A short ownership period can suggest trading
Keeping an item for a long time before selling supports the argument it was personal use or investment

Practical Advice: Keep Clear Records

Whether you’re selling casually or operating as a business, keeping good records is essential.

You should keep evidence of:

Purchase invoices or receipts
Dates of purchase and sale
Whether items were used personally
Costs such as postage, platform fees, packaging, etc.

Good records can help you justify your position if HMRC ever asks questions.

Final Thoughts

Online selling can start as a hobby — but it can quickly move into business territory without you realising it.

If you’re selling frequently, buying stock to resell, or earning more than £1,000 per year, it’s worth checking whether you should be declaring your income.

If you’re unsure, professional advice can help you avoid unexpected tax bills and HMRC penalties.

Partner note: