Christmas is coming and many people use the celebration time to sell items such as handmade Christmas cards and goods on seasonal market stalls. Influencers and content creators may receive Christmas gifts in return for social media promotion and more people will log onto platforms such as eBay and Etsy for their Christmas present buying. However, what to the sellers may seem to be a hobby, may not be so viewed by HMRC.
‘Help for hustles’ campaign
HMRC’s guidelines are explicit – if a seller makes money from selling goods or services (e.g. tutoring or dog walking) with the intention to make a profit (even on a small scale), it can count as a business potentially liable for both tax and NIC. HMRC’s ‘help for hustles’ campaign reminds anyone earning extra income from such activities that they must inform HMRC if they earn more than £1,000 (being the amount of the ‘trading allowance’).
The campaign specifically targets seasonal traders, explaining the distinction between selling unwanted personal belongings (which usually do not require reporting), and trading activities that may be taxable. The ‘campaign’ is shown on a website page, but HMRC also issues letters to those sellers it believes may be in business (including sellers identified from viewing social media platforms) that they may be in business.
Online platforms
In December 2024, HMRC issued a press release titled No tax changes for online sellers, confirming that platforms such as eBay and Etsy – and even Deliveroo, Airbnb and Amazon – would be required to share sales data and personal information with HMRC.
The declaration is of the seller’s name, address, date of birth, NI number and details of sales (both number of transactions and gross proceeds). According to HMRC’s guidance, platforms must report sellers who either make 30 or more sales in a year or earn in excess of €2,000 (approximately £1,700) in gross sales. Platform operators are required to give the individual a copy of the data reported to HMRC.
‘Badges of trade’
Whether the selling comes under the heading of a ‘trade’ depends on whether HMRC judges any one of the nine ‘badges of trade’ to be present. It is not necessary for all ‘badges’ to be present – the existence of just one can be enough.
Clearly some badges carry greater weight than others, given differing circumstances.
The nine ‘badges of trade’ listed under HMRC’s Business Income Manual at BIM20205 are:
– profit-seeking motive;
– number of transactions;
– nature of the asset;
– existence of similar trading transactions;
– changes to the asset;
– method of sale;
– source of finance;
– interval of time between purchase and sale; and
– method of acquisition.
Trading allowance
Tax will be chargeable on any income less expenses, taxed at the taxpayer’s highest rate of tax.
There is a trading allowance of £1,000, which can be set against income from trading activities. If gross income is below this threshold, the sales do not have to be reported to HMRC. Above this amount, the allowance can be deducted from the gross income and tax and NICs paid on the excess, as applicable.
Instead of claiming the trading allowance, any expenses incurred wholly and exclusively in carrying on the activity can be deducted to calculate the taxable income.
If a loss arises, it may be beneficial not to claim the allowance as the loss could be deducted from other income when calculating any overall income tax liability.
Non-cash benefits
Many influencers receive non-cash benefits (e.g. free products or services received in exchange for a promotion or review). To comply with tax rules, these items should be valued and reported as trading income and added to any cash that may have been received.
Practical point
HMRC provides an online checker tool to help individuals determine their need to report additional income, along with guidance on how to navigate tax implications related to side hustles.
Partner note:
HUSTLE TAX
The blurring line between a festive hobby and a taxable trade.
The "side hustle economy" has changed how we earn. But HMRC is watching. From the £1,000 Trading Allowance to the new Digital Dragnet, understanding compliance is the only way to protect your income.
1. The £1,000 Safety Net
The Trading Allowance is your first line of defense. It offers a £1,000 tax-free buffer zone. If your gross trading income is under £1,000, you generally don't need to report it.
However, once you cross that threshold, you face a critical mathematical choice: Claim the Allowance OR Deduct Actual Expenses. You cannot do both.
Strategic Insight
If your expenses are low (e.g., digital services), the Allowance usually saves you money. If expenses are high (e.g., reselling physical goods), claiming actual costs protects your profit margins.
Optimization: Taxable Profit Scenarios
Chart compares Taxable Profit (Lower is better) based on method choice.
2. The Digital Dragnet
Compliance is no longer voluntary. Online platforms (eBay, Vinted, Airbnb) are now legally mandated to share your sales data with HMRC if you hit specific triggers.
30+ Items
Number of transactions sold in a calendar year.
€2,000+
Gross sales proceeds (approx £1,700).
AUTOMATIC DATA SHARING
Platform sends: Name, Address, DoB, NI Number, and Sales Totals directly to HMRC. You receive a copy.
3. The 9 Badges of Trade
Operating just above the £1,000 allowance? HMRC uses these nine legal tests to decide if you are a "Business" or a "Hobby". Just one badge can be enough to prove a trade.
Profit-Seeking Motive
🎯Did you intend to make money? Pricing strategies and market research indicate a trade, not a hobby.
Transaction Frequency
📊Systematic, repeated sales? High volume (especially over 30 items) strongly suggests a business.
Nature of Asset
📦Are you selling investment items (personal) or inventory (manufactured goods/bulk buys)?
Similar Trades
🤝Do you already do this professionally? A photographer selling prints online is likely trading.
Modifications
🛠Did you repair, restore, or improve the item to increase its value before selling?
Method of Sale
📣Did you advertise? Set up a market stall? Use a business Instagram account?
Source of Finance
💳Did you borrow money or invest capital specifically to buy stock?
Time Interval
⏱Short time between buy and sell? A "quick flip" indicates trading intent.
Acquisition Method
🛒Was it bought specifically to resell? Inherited gifts are rarely trade assets.
Compliance Roadmap
5th April
Tax Year Ends
Calculate your total gross trading income for the year.
5th October
Register
Deadline to register for Self-Assessment if income > £1,000.
31st January
File & Pay
Submit online return and pay tax owed. Late = £100 Penalty.
