The complete tax guide to selling on Etsy

If you're a (UK-based) Etsy seller, or a creator making some extra money on the side, your Etsy income is taxable in the UK, but there are ways to reduce the tax bill.

You're in the right place to find out what you need to know about taxes, and the specific tax reliefs you may be able to claim as an Etsy seller.

untied — the UK's personal tax app — helps people take care of their taxes, making filing tax returns simple and easy for Etsy sellers just like you!

Do I have to declare my Etsy income?

If you’re just dipping your toe in the water or this is a hobby, the good news is that HMRC doesn’t expect you to declare Etsy or other income if the total for the year is less than £1,000. This is known as your 'trading allowance'.

If you earn more than £1,000, the short answer is “Yes”, HMRC does want to hear about it! However, that still doesn’t necessarily mean you’ll have to pay tax on it...

Do Etsy sellers have to pay tax?

Everyone is entitled to tax-free allowances, regardless of what their income sources are —employment, dividends, or income from selling on Etsy. You’re also able to claim certain expenses. However, this must all be included on your annual self-assessment tax return.

What taxes do I pay as an Etsy seller?

In general, you'll pay Income Tax, and both Class 2 and Class 4 National Insurance. The amount of Income Tax depends on how much profit you make. That's the amount left over once you’ve added together your income and taken away the expenses or allowances that you can claim.

VAT - if you’re making this into a full business, you may also get close to the VAT registration threshold of £90,000 and need to follow the VAT rules and produce more detailed accounts.

What expenses can I claim if I sell on Etsy?

If you’re an Etsy creator , you can deduct an extensive list of expenses if they are incurred because of your business and you pay for them yourself.

Allowable expenses include:

Etsy seller fees (listing and website etc)
Materials and equipment
Postage and packaging costs
Costs associated with selling your creations / doing shows / event space (e.g. market stalls, pop-up shops, table fees and transport)
Marketing and photography costs
Accountant fees and card processing charges

untied makes it very quick and easy to run through payments you’ve made from your bank accounts, and then tag and list those items that you want to claim as expenses. Don't forget that you can even claim the cost of untied as an expense if you're using it solely for your business.

How to register for self assessment?

If you earned over £1,000 from self employment in the tax year — a tax year runs from 6 April one year to 5 April the following year — you need to register with the tax authority (HMRC) by 5 October.

untied can take care of registration for you, or you can register yourself via the HRMC website.

Don't worry if you've missed the 5 October deadline to register, we can still help you. Get in touch with us at team@untied.io

How do I file a tax return?

The quickest and simplest way to submit your tax return is to use untied. The untied app helps you stay organised throughout the year, shows you a real-time tax calculation, and you can file your tax return directly from your mobile or desktop browser.

untied also works with a number of accountants who use our adviser portal, or we can refer you to an accountancy firm.

Alternatively, if you want to complete all the forms and do the whole tax return submission yourself, you can use the HMRC website.

Your taxes with untied

Tax rules do change from time to time. But the good news is with untied you don’t need to be a tax expert.

The untied app makes it easy to stay on top of your Etsy income and expenses, prompting you to pay exactly what you owe and claim any tax relief you might be entitled to. It’s quick to use, automating repetitive tasks, freeing up your time to spend on your Etsy business, rather than on your taxes.

As the 31 January submission deadline is fast approaching, you can save even more time by using the app to submit your end-of-year self-assessment tax return to HMRC directly from your mobile phone. Very handy!