If you’re selling online — whether on eBay, Etsy, Amazon, Shopify, or even through Instagram — chances are your days are already full. Between managing stock, replying to customer messages, and squeezing in the occasional late-night packaging session, tax admin is probably the last thing on your mind. Then January arrives, and suddenly the Self Assessment tax return takes centre stage.
If the mere thought of tax forms makes your stomach drop, don’t panic — you are far from alone. Thousands of online sellers across the UK feel exactly the same way every year.
The good news is that Self Assessment isn’t as complicated or intimidating as it first appears. Once you understand the basics, it becomes a manageable part of running your business rather than a source of stress.
In this blog, we will make Self Assessment easy to understand. We will answer the most common questions online sellers have, showing you exactly what to do, when to do it, and how to stay on top of it all without stress.
Do you need to send a Self Assessment tax return?
Not everyone who sells online needs to file a tax return. It depends on whether HMRC sees you as trading or simply selling personal items. For many online sellers, additional income from trading means you’ll fall into that “other income” category (i.e. income outside of employment or pension) and thus Self Assessment will apply.
If you’re just selling the odd personal item, a few old clothes, last year’s iPhone, or a second-hand bike, you don’t need to register. That’s just decluttering.
But if you’re buying stock to resell, making handmade products, or running your store like a business (even part-time), then yes, you’ll need to register for Self Assessment and declare your earnings.
If you make more than £1,000 in sales in a tax year, you must register. That’s called the trading allowance, and anything over that must be reported to HMRC.
If you make more than £50,000 in a year from your self employment, you will need to report this via Making Tax Digital for Income Tax. You can find more about how to do this here.
When do you need to register?
If you need to complete a tax return for the previous year and you have not sent one before, you must tell HMRC by 5 October (after the end of the tax year) that you need to do so. If you miss the 5 October deadline, register asap and ensure you complete the self assessment and pay any outstanding tax by 31st January.
In the UK, the tax year runs from 6 April to 5 April the following year. So for activity during the tax year ending 5 April 2025, you’d need to register by 5 October 2025 if you haven’t done one already.
If you’re self-employed, you’ll also need to register for Class 2 National Insurance contributions (or at least inform HMRC) once profits reach the small profits threshold.
What counts as income for an online seller?
For online sellers, income isn’t just what you take home; it’s the gross proceeds from sales, minus allowable expenses. Some points to keep in mind:
- If you’re selling items you already own (for personal use) and you’re simply disposing of them, that’s usually outside the business trading rules. But if you’re buying items specifically to resell or regularly sourcing stock, that counts as business income.
- If you receive payments via third-party sites (marketplace fees, etc), you should include gross payment amounts.
- If you offer services (e.g. digital downloads, teaching online, custom merchandise), then you’re trading and the income must be declared.
- Remember: you might need to pay Income Tax on the profit (income minus expenses) and possibly Class 2 & Class 4 National Insurance contributions (if self‐employed) in addition.
What expenses can you deduct?
One of the big advantages of filing a proper Self Assessment is that you can deduct allowable expenses, which means you only pay tax on your profit, not your turnover. For online sellers, typical allowable expenses might include:
- Cost of goods sold (stock you purchase to resell)
- Marketplace or platform fees (eBay, Amazon, Etsy, etc.)
- Postage, packaging, shipping costs (if you’re shipping goods to customers)
- Website hosting or domain costs
- Any software or tools used (e.g., bookkeeping software, photo editing)
- Office equipment (if used solely for the business) — but you’ll need to apportion if used for personal use too.
- Business phone/internet costs (again, only the business portion)
- Travel costs if you visit suppliers or fairs (but be careful to keep detailed records)
- Home office costs if you use a room at home for your business (there are simplified flat-rate methods).
Deadlines — when do you need to file and pay?
Deadlines matter. For online sellers, missing a deadline can trigger penalties or interest.
Key dates:
- 5 October: Register for Self Assessment if you need to.
- 31 October: If you’re submitting a paper return, that’s the deadline (for the tax year ended 5 April).
- 31 January: Deadline for online submissions and for payment of any tax you owe for the previous tax year.
- 31 July: For paying the second payment on account (if applicable) for the current year.
- 30 April: For paper amendments (much less common these days).
So if you’re filing for the year ended 5 April 2025, you’ll need to have your return submitted online by 31 January 2026 and pay any tax you owe by that date.
How to file your return
Most online sellers will file their returns online. Your Self Assessment tax return can be completed electronically via HMRC’s online services. Here’s the general process:
- If you’re not already registered for Self Assessment, you should register first to get a Unique Taxpayer Reference (UTR).
- You then log in via your Government Gateway and complete the SA100 form (and any supplementary pages if needed, e.g., self-employment pages for sole traders).
- You fill in your income, expenses, calculate your profit, declare tax due, and send the return.
- You’ll receive confirmation from HMRC (keep a copy).
- Then you pay any tax due by the payment deadline.
It’s wise to use bookkeeping software or at least keep a spreadsheet to track income and expenses so that when the time comes, filing is straightforward.
Penalties and interest
Missing HMRC deadlines can be expensive. If you file late, pay late, or miss key tax dates, HMRC will automatically charge penalties and interest — even if the delay is unintentional. These fines add up quickly, which is why filing on time is critical.
HMRC penalties include:
- 1 day late = £100 fine
- 3 months late = £10 per day, up to £900
- 6 months late = 5% of the tax owed or £300, whichever is higher
- Ongoing = Daily interest on any unpaid tax
Even if you can’t pay your tax bill straight away, you should still submit your return on time. Filing late triggers penalties automatically, but payment issues can often be managed. HMRC offers Time to Pay arrangements, allowing you to spread the cost over manageable instalments and reduce further enforcement action.
Conclusion
Staying on top of Self Assessment isn’t only about avoiding fines — it’s about keeping your online business running smoothly. Organising your records, filing by the deadline, and claiming the expenses you’re allowed can save you money and stress.
Clear records also make tax season much simpler and help you get a better understanding of your business. If you’re unsure where to start, don’t worry — we are here to guide you through each step, ensuring everything is done correctly and that you make the most of your eligible claims. Get in touch with us today for help.
