Do You Pay Tax on Etsy Sales in the UK? HMRC Rules (2026)

Yes. If you sell print-on-demand products on Etsy from the UK, you’re trading, and once your gross trading income goes over £1,000 in a tax year you need to register for Self Assessment and pay any Income Tax and National Insurance due on your profit. If your total trading income for the year is £1,000 or less, the trading allowance usually means you don’t need to tell HMRC at all.

Separately, Etsy now reports sellers to HMRC once they make 30 sales or about £1,700 in a calendar year. That’s a report, not a new tax, but it means HMRC can see your Etsy income. This guide covers the allowance, the deadlines, what Etsy shares, National Insurance, VAT (including the VAT hidden in your Etsy fees and provider bills) and a record-keeping routine that fits around a day job.

Is selling print-on-demand on Etsy trading?

Almost certainly. HMRC’s guidance says you’re likely to be trading if you make items to sell for profit or sell regularly to make a profit, and POD is exactly that: you design products and sell them with a markup. It’s different from clearing out your wardrobe on a resale app, where selling your own possessions usually isn’t trading.

Being a trader doesn’t automatically mean you’ll owe tax. It means you work out your profit, compare your income with the allowances below, and tell HMRC if you’re over the line. If you’re still setting up, our guide to print-on-demand in the UK covers providers, fees and delivery.

The £1,000 trading allowance, explained

The trading allowance gives you up to £1,000 of tax-free trading income each tax year (6 April to 5 April). Two details catch POD sellers out:

• It’s based on gross income, meaning your sales before any costs. A POD shop with £1,400 of sales and £1,000 of costs is over the allowance, even though it made only £400 profit.
• It covers all your side hustles together. HMRC’s own example: £800 from content creation plus £500 from selling crafts online is £1,300, which is over the allowance.

If your gross trading income is over £1,000, you choose between deducting your actual expenses or deducting the £1,000 allowance instead; you can’t do both. POD costs are high (in our profit margin examples, the provider’s product and delivery costs alone are over half the sale price), so actual expenses usually win once sales grow. At very small sales, the allowance can come out ahead:

“Taxable” isn’t the same as tax to pay. Your trading profit is added to your other income, and Income Tax only applies above your Personal Allowance of £12,570. For 2026–27 in England, Wales and Northern Ireland, the basic rate is 20% on income from £12,571 to £50,270, and the higher rate of 40% starts above that.

A quick example: Sam earns a £32,000 salary and makes £720 profit from an Etsy POD shop. Sam’s salary already uses the Personal Allowance, so the £720 is taxed at 20%, which is £144 of Income Tax. There’s no National Insurance to pay on a profit that size, as the section below explains.

When and how to register for Self Assessment

If you need to report, you register for Self Assessment as self-employed, which is how you become a sole trader. The deadline is 5 October after the end of the tax year in which you started trading. You then file your return online and pay what you owe by 31 January. For the 2025–26 tax year (6 April 2025 to 5 April 2026), the dates look like this:

Watch out for payments on account in your second year. If your last Self Assessment bill was £1,000 or more, and less than 80% of your tax was collected at source (for example through PAYE at your job), HMRC asks for two advance payments towards the next year, each worth half of last year’s bill. The first is due on the same 31 January as your balancing payment, which can make that January bill much bigger than you expected. If you have a day job, PAYE often covers more than 80% of your total tax, in which case you won’t need them; if not, set money aside.

What Etsy reports to HMRC

Under the UK’s digital platform reporting rules, based on OECD model rules and applying from 1 January 2024, Etsy has to report UK sellers to HMRC every year. It reports you if, in a calendar year, you make 30 or more sales of physical goods or receive about €2,000 (roughly £1,700) or more. Only sellers under both limits are left out.

For an individual seller, what gets shared includes:

• your name, address and date of birth;
• the bank account your sales are paid into;
• your National Insurance number, and your VAT number if you have one;
• how many sales you made, and the amounts paid to you and the fees Etsy charged, quarter by quarter.

Etsy sends you a PDF summary of what it reported by 31 January each year, as its seller reporting article explains, and HMRC can share the information with tax authorities in other countries that follow the same rules. If Etsy asks you to confirm your details and you don’t respond in time, it can put your shop into vacation mode until you do.

Two practical points. First, a report doesn’t mean you owe tax: a seller with 40 small sales totaling £700 will be reported, but may be under the trading allowance. Second, Etsy reports on the calendar year (January to December), while your tax year runs from 6 April to 5 April, so the figures won’t match your return. Use your own records for the tax year and keep Etsy’s summary as a cross-check.

Allowable expenses for POD sellers

If you use actual expenses instead of the trading allowance, these are the costs most UK POD sellers can typically deduct, as long as they’re for the business:

Most sole traders use the cash basis, now the standard method, which means you record income when the money comes in and expenses when you pay them. For a POD shop that usually matches the way Etsy deposits and provider charges already work. Our Etsy fees breakdown lists every fee to look for on your statement, including the UK payment processing rate.

National Insurance on Etsy profits

Self-employed National Insurance is based on your trading profit alone, not on your salary as well. The figures for 2026–27:

You no longer pay compulsory Class 2 contributions. If your profit is above the Small Profits Threshold, you get National Insurance credits towards your State Pension without paying anything extra. Below it, you can choose to pay voluntary Class 2 contributions (£3.65 a week in 2026–27), which may be worth it if you don’t already get a qualifying year from a job. A side-hustle shop has to make more than £12,570 profit before Class 4 applies at all.

VAT: when Etsy sellers need to register

You must register for VAT if your VAT-taxable turnover goes over £90,000 in any rolling 12-month period, or if you expect it to go over £90,000 in the next 30 days alone. That’s turnover, not profit, but it’s far above what most side-hustle shops sell. If you pass it, you have 30 days from the end of the month you went over to register.

Which POD sales count towards that figure can get complicated: it depends partly on where each order is printed and shipped from, and an order printed and delivered in the UK is treated differently from one printed and delivered abroad. If you’re heading towards the threshold, bring in an accountant who understands e-commerce early.

Even below the threshold, VAT affects you in three ways:

• VAT on Etsy fees. Etsy adds VAT to seller fees for UK sellers who haven’t given it a VAT number, and issues a monthly VAT invoice in your Payment account. Once you add a UK VAT number, Etsy stops charging it.
• VAT on your provider’s bill. Providers charge VAT on orders delivered in the UK. Printful, for example, charges 20% on orders fulfilled and shipped within the UK. If you’re not VAT registered you can’t reclaim it, so build it into your prices (our POD pricing guide shows how).
• VAT Etsy collects from buyers. Etsy handles VAT on many cross-border orders for you:

Making Tax Digital: why your gross sales matter

Making Tax Digital for Income Tax started on 6 April 2026. It requires sole traders (and landlords) to keep digital records and send quarterly updates to HMRC through compatible software once their qualifying income is over a threshold:

The key words are “before expenses”. Qualifying income is turnover, not profit, and POD has high turnover compared with profit. A shop with £32,000 of sales in 2025–26 and £6,000 of profit would be brought into Making Tax Digital from April 2027, even though its profit is modest. If your shop is growing, check the thresholds against your gross sales and choose bookkeeping software early.

The £3,000 threshold: what’s changing and what isn’t

In March 2025 the government announced that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 (gross), with a new, simpler digital service for people with income below the new threshold. It’s due to happen by the end of the current Parliament. At the time of writing, it hasn’t come into force.

Two things don’t change. The tax-free trading allowance stays at £1,000, so income between £1,000 and £3,000 can still be taxable: you’d report it through the new service instead of a full tax return. And the government has been clear that people’s tax liability won’t change; it’s about how you report, not what you owe. Until the new service exists, the £1,000 rule and Self Assessment apply.

Records to keep, and a monthly routine

Keep your business records for at least five years after the 31 January submission deadline for the tax year they relate to. For a POD shop, that means:

• Etsy monthly statements and sales CSV downloads, plus the monthly VAT invoices for your fees;
• your provider’s order invoices;
• receipts for samples, software and anything else you claim;
• bank statements for the account your Etsy payouts go into;
• Etsy’s annual platform reporting summary.

A monthly routine that takes about 20 minutes: download last month’s Etsy statement and your provider invoices, add any other costs to a spreadsheet or bookkeeping app, work out the month’s profit and move a share of it into a separate savings pot for your tax bill. A dedicated bank account for the shop makes every step faster, which matters when your shop is a side hustle squeezed into a few hours a week.

Bring in an accountant when you’re close to the VAT or Making Tax Digital thresholds, if you sell a lot to the EU, if you’re thinking of setting up a limited company, or simply for your first return if it makes you nervous.

Selling from the US instead? See our guide to print-on-demand taxes for US Etsy sellers. And if you ship to buyers in the EU or Northern Ireland, product safety rules apply to those sales as well: see GPSR for Etsy and POD sellers.