The Question Every UK Reseller Asks Eventually
"Do I actually need to pay tax on this?" It's the most common question in every reselling community, and the answer is less complicated than people make it. The short version: if you're regularly buying items with the intention of reselling them for profit, HMRC considers you a trader and you have tax obligations. The "it's just a hobby" defence doesn't hold up when you're running a systematic operation.
That said, HMRC isn't coming after someone who sold their old PlayStation on Facebook Marketplace. There's a clear line between casual selling and trading — this guide explains where that line is, what you owe when you cross it, and how to handle it all without overpaying or getting into trouble.
When HMRC Considers You a Trader
HMRC doesn't have a single threshold that flips you from "casual seller" to "trader." Instead, they look at a set of indicators called the "badges of trade" to determine whether your activity constitutes trading. The main ones relevant to resellers:
- Intention to profit — are you buying items specifically to resell them at a higher price? That's trading. Selling your own unwanted belongings isn't
- Frequency — selling 5 items a year is different from selling 50 a month. Regular, repeated selling activity looks like a business
- Nature of the items — selling a variety of new or sourced products (rather than personal possessions) signals trading
- Modifications or improvements — if you're cleaning, repairing, or repackaging items to increase their value before selling, that's business activity
- How quickly you sell — buying and selling items within a short timeframe suggests trading rather than disposing of personal items
You don't need to tick every box. HMRC looks at the overall picture. But if you're reading this guide because you're actively reselling on eBay, Vinted, or TikTok Shop with the intention of making money — you're trading.
The Trading Allowance: Your First £1,000 Is Tax-Free
Before you panic about registering and filing returns, there's good news. HMRC provides a £1,000 trading allowance that covers casual trading income. If your total trading income (not profit — gross income) is under £1,000 in a tax year, you don't need to register as self-employed or file a tax return for it.
For most active resellers, you'll blow past this threshold quickly. If you're selling more than a handful of items a month, you're almost certainly over £1,000 in annual trading income. At that point, you need to register.
Registering as Self-Employed
If your trading income exceeds £1,000, you need to register as a sole trader with HMRC. This is free, takes about 10 minutes online, and gives you a Unique Taxpayer Reference (UTR) number.
Once registered, you'll file a Self Assessment tax return each year (by 31 January for the previous tax year). This is where you declare your trading income and expenses, and HMRC calculates what you owe.
For a detailed comparison of operating as a sole trader versus setting up a limited company — including when it makes sense to switch — read our sole trader vs limited company guide.
What You Pay Tax On (And What You Don't)
This is the part most people get wrong. You pay tax on your profit, not your revenue.
If you sold £20,000 worth of items on eBay but spent £12,000 on stock, £2,500 on fees, and £1,500 on postage, your taxable profit is £4,000 — not £20,000. Every legitimate business expense reduces what you owe.
Allowable Expenses for Resellers
These are costs you can deduct from your income before calculating tax:
- Stock costs — everything you paid for the items you sold
- Platform fees — eBay final value fees, eBay seller fees, TikTok Shop commission, any marketplace charges
- Postage and delivery — Royal Mail, Evri, DPD, any courier costs
- Packaging materials — boxes, poly mailers, tape, bubble wrap
- Software and tools — listing software, research tools, inventory management, reselling subscriptions
- Mileage — trips to the post office, sourcing trips, car boot sales (keep a log)
- Phone and internet — a proportion of your bill if you use them for business
- Home office — a proportion of household costs if you work from home (HMRC has a simplified expenses method for this)
- Professional fees — accountant costs, bookkeeping software
Income Tax Rates for 2025/26
Once you've calculated your taxable profit (income minus expenses), you pay Income Tax at the following rates:
- £0 – £12,570 — 0% (Personal Allowance, tax-free)
- £12,571 – £50,270 — 20% (Basic rate)
- £50,271 – £125,140 — 40% (Higher rate)
- Over £125,140 — 45% (Additional rate)
If you have a day job, your reselling profit is added on top of your employment income. So if you earn £30,000 from your job and £10,000 profit from reselling, your total income is £40,000 — meaning the reselling profit is taxed at 20% (you've already used your Personal Allowance against your salary).
National Insurance
On top of Income Tax, self-employed traders pay National Insurance contributions:
- Class 2 — a flat weekly rate (currently around £3.45/week) if your profits exceed the Small Profits Threshold
- Class 4 — 6% on profits between £12,570 and £50,270, and 2% above that
VAT: When Turnover Matters More Than Profit
VAT is separate from Income Tax and catches a lot of resellers off guard because it's based on turnover (total sales), not profit.
You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period (2025/26 threshold). You can also register voluntarily below this threshold if it benefits your business.
For high-volume resellers dealing in lower-margin items, hitting the VAT threshold can happen faster than expected. If you're buying stock for £10 and selling for £25, your turnover adds up quickly even though your actual profit per item is modest. Selling 300 items a month at an average of £25 puts you at £90,000 annual turnover — and you're VAT registered territory.
Important: Once VAT registered, you charge VAT on your sales (currently 20%) and can reclaim VAT on your business purchases. The maths changes your pricing and margins significantly. Get professional advice before and after registration — the transition period trips a lot of people up.
Payment Deadlines: Don't Get Caught Out
The Self Assessment tax year runs from 6 April to 5 April. Key deadlines:
- 5 October — deadline to register as self-employed for the current tax year (if you haven't already)
- 31 October — deadline for paper tax returns
- 31 January — deadline for online tax returns AND payment of the tax owed for the previous year
- 31 July — second payment on account (advance payment towards next year's bill) if applicable
The January deadline is the one that catches people. Your tax bill for the year April 2025–April 2026 is due on 31 January 2027. If you haven't been setting money aside throughout the year, it's a nasty surprise.
Common Mistakes That Cost Resellers Money
1. Not registering at all
HMRC can see your platform activity now. Failing to register when you should have doesn't make the tax go away — it adds penalties and interest on top. Register proactively, even if you're not sure you'll exceed the thresholds.
2. Confusing turnover with profit
Your eBay dashboard showing £15,000 in sales doesn't mean you owe tax on £15,000. You owe tax on profit after expenses. But you need records to prove those expenses — which means tracking everything.
3. Forgetting that selling platforms report to HMRC
eBay, Vinted, Etsy, Amazon, and other platforms now report your sales data directly to HMRC. This isn't optional for the platforms — it's a legal requirement. Assume HMRC knows what you've sold.
4. Not claiming legitimate expenses
Every unclaimed expense means paying more tax than you need to. Mileage, packaging, tool subscriptions, phone bills — they're all deductible. The effort of tracking them is repaid many times over at tax time.
5. Leaving tax until January
A full year of untouched bookkeeping, dumped on an accountant in mid-January, results in rushed returns, missed deductions, and stress. Keep your records updated monthly — even 20 minutes a month keeps everything manageable.
Do You Need an Accountant?
If you're a sole trader with straightforward reselling income and expenses, you can absolutely do your own Self Assessment using HMRC's online system or software like FreeAgent. It's not as intimidating as it sounds — it's essentially entering your income, subtracting your expenses, and the system calculates what you owe.
An accountant becomes more valuable when your income grows, you're approaching the VAT threshold, or you're considering switching to a limited company. A good accountant typically saves you more in tax optimisation than they cost in fees. Budget £150–£300/year for a sole trader return, or £800–£2,000/year if you go limited.
Either way — whether you do it yourself or hire someone — the foundation is the same: accurate, up-to-date records of everything you've bought, sold, and spent. That's non-negotiable.
Getting Started the Right Way
If you're already reselling and haven't registered yet, don't panic — just sort it now. Register as a sole trader, start tracking your income and expenses, and set aside money for tax monthly. The penalties for late registration are relatively small if you come forward proactively rather than waiting for HMRC to find you.
If you're just getting started with reselling, register before you make your first sale. It costs nothing, takes minutes, and means you're compliant from day one. Read our complete beginner's guide to reselling for the full picture on what to sell, where to sell it, and how to build a profitable operation — with your tax sorted from the start.