Allowable Expenses for Self-Employed Online Sellers UK
Short answer: allowable expenses are the costs you pay to run your selling business, and you take them off your sales to get your taxable profit. For online sellers that means stock, platform fees, postage, packaging, ads, software, a share of your phone and home costs, and mileage at HMRC’s flat rates. Everyday clothes, entertaining and anything personal don’t count. Since 2024 most sole traders use the cash basis, so you claim costs in the year you pay them, equipment included.
This guide is for self-employed online sellers in the UK: Etsy makers, Vinted and eBay resellers, Shopify and Amazon sellers, and anyone selling at craft fairs. It starts with whether your selling is a hobby or a business, covers how to register as self-employed and the Self Assessment deadlines, then lists what you can and can’t claim, with two worked examples taken all the way to the tax bill at 2026 to 2027 rates.
Expenses at a glance
Section titled “Expenses at a glance”| Cost | Allowable? | How to claim |
|---|---|---|
| Stock for resale, raw materials | Yes | In full, when you pay for it (cash basis) |
| Etsy, eBay, Amazon, Shopify and payment fees | Yes | In full |
| Postage, packaging, shipping labels | Yes | In full |
| Advertising and promoted listings | Yes | In full |
| Camera, lightbox, printer, laptop, tools | Yes | As an expense in the year you buy (cash basis), minus personal use |
| Software and subscriptions | Yes | Business share |
| Phone and internet | Partly | Business share only |
| Working from home | Partly | Flat rate of £10, £18 or £26 a month, or a share of actual costs |
| Car or van mileage | Yes | 55p a mile for the first 10,000 business miles in 2026 to 2027 |
| Craft fair and market stall fees | Yes | In full |
| Everyday clothing, entertaining, fines, your own drawings | No | Not allowable |
If your total allowable costs are under £1,000 a year, the £1,000 trading allowance may give you a bigger deduction. More on that below.
Hobby or business?
Section titled “Hobby or business?”Before expenses matter, you need to know whether you’re trading at all. If you’re not, there’s no Income Tax to pay and nothing to claim.
HMRC’s online guidance puts it simply. Selling unwanted personal items from your home now and then is unlikely to be taxable. If you buy or make goods to sell at a profit, you’re likely to be trading (gov.uk: selling on a digital platform). When it’s less obvious, HMRC and the courts use the badges of trade.
HMRC’s badges of trade, with seller examples
Section titled “HMRC’s badges of trade, with seller examples”HMRC’s manual BIM20205 lists nine badges. No single badge decides it. HMRC looks at the overall picture.
| Badge of trade | Points to a hobby | Points to a business |
|---|---|---|
| Profit-seeking motive | You sell old clothes to clear space | You buy charity-shop clothes because they’ll sell for more on Vinted |
| Number of transactions | A one-off clear-out | Dozens of sales a month, every month |
| Nature of the asset | Things you used yourself | Goods you never meant to use, such as 40 pairs of the same trainer |
| Similar trading activity | Unrelated to your job | You already work in fashion retail or run a related shop |
| Changes to the asset | Sold as it is | You upcycle, repair, clean, repackage or customise before selling |
| How the sale was carried out | A quick listing with a phone photo | Branded shop, professional photos, promoted listings, regular stock drops |
| Source of finance | Paid from spare cash | You borrowed money or used a credit card to buy stock |
| Time between buying and selling | Owned for years | Bought and resold within weeks |
| How you got it | A gift or inheritance | Bought specifically to sell |
Three sellers, three answers
Section titled “Three sellers, three answers”- Hollie clears her wardrobe on Vinted. Over a year she sells 60 items she used to wear, all for less than she paid. That’s not trading, even though Vinted will report her to HMRC for passing 30 sales. No tax, no Self Assessment.
- Sam buys job lots at car boot sales every Sunday and resells them on eBay within a fortnight, at a mark-up. Profit motive, frequency, quick turnaround and buying to sell all point one way. Sam is trading.
- Ruth knits scarves and sells a handful to friends each winter for roughly the cost of the wool. There’s little profit motive and few sales, so it’s more likely a hobby. If she opened an Etsy shop and sold regularly at a profit, that would change.
Once you’re trading, the next question is whether your gross sales are over £1,000 a year. If they’re not, the trading allowance covers you and you don’t need to register. The trading allowance guide explains that in detail.
How to register as self-employed
Section titled “How to register as self-employed”If you’re trading and your gross sales go over £1,000 in a tax year (6 April to 5 April), you need to tell HMRC by registering for Self Assessment as self-employed. As a sole trader you don’t need to set up a company or register a business name: you can trade under your own name.
Step by step
Section titled “Step by step”- Check you need to. Use HMRC’s tax return checker if you’re unsure.
- Register online through gov.uk’s Register for Self Assessment service. Have your National Insurance number, contact details and the date you started trading ready.
- Get your Unique Taxpayer Reference (UTR). HMRC sends it after you register. You need it to file your return.
- Set up your online account so you can file your return and see what you owe.
- Start keeping records from your first sale, if you haven’t already (see records to keep).
The registration deadline: 5 October
Section titled “The registration deadline: 5 October”You must register by 5 October after the end of the tax year in which you started trading. For example:
| You started selling | Tax year | Register by | First return and payment due |
|---|---|---|---|
| June 2025 | 2025 to 2026 | 5 October 2026 | 31 January 2027 |
| November 2026 | 2026 to 2027 | 5 October 2027 | 31 January 2028 |
Register late and you may get a failure to notify penalty, based on any tax still unpaid at 31 January (gov.uk penalties). If you register after 5 October, HMRC gives you 3 months from its letter to file, but the tax is still due on 31 January.
Self-employed tax in the UK: what you pay
Section titled “Self-employed tax in the UK: what you pay”As a sole trader you pay Income Tax and National Insurance on your profit: your sales minus your allowable expenses. Rates for 2026 to 2027, outside Scotland, from gov.uk’s Income Tax rates and self-employed National Insurance pages:
| Profit (total income) | Income Tax | Class 4 National Insurance |
|---|---|---|
| Up to £12,570 | 0% (Personal Allowance) | 0% |
| £12,571 to £50,270 | 20% | 6% |
| £50,271 to £125,140 | 40% | 2% |
| Over £125,140 | 45% | 2% |
- Class 2 National Insurance: you don’t pay it. If your profit is £7,105 or more, it’s treated as paid, which protects your State Pension record. Below that, you can pay voluntarily at £3.65 a week.
- The Personal Allowance shrinks by £1 for every £2 of income over £100,000.
- Scotland has its own Income Tax bands and rates. National Insurance is the same UK-wide.
- If you also have a job, your salary uses the Personal Allowance first, so your selling profit is taxed at 20% or 40% from the first pound. Class 4 is still only charged on self-employed profit over £12,570.
Self Assessment deadlines and penalties
Section titled “Self Assessment deadlines and penalties”| Deadline | What’s due for the 2025 to 2026 tax year |
|---|---|
| 5 October 2026 | Register, if this is your first return |
| 31 October 2026 | Paper return |
| 30 December 2026 | Online return, if you want tax under £3,000 collected through your PAYE tax code |
| 31 January 2027 | Online return, tax owed for 2025 to 2026, and first payment on account for 2026 to 2027 |
| 31 July 2027 | Second payment on account for 2026 to 2027 |
Dates are from gov.uk’s Self Assessment deadlines page. The 2026 to 2027 return follows the same pattern a year later: due online by 31 January 2028.
Payments on account
Section titled “Payments on account”If your Self Assessment bill is £1,000 or more, and less than 80% of your tax is already collected through PAYE, HMRC asks for payments on account: two advance payments towards next year’s bill, each half of this year’s, due on 31 January and 31 July. In your first year this can mean paying 150% of your bill in January. Plan for it.
Late filing and late payment penalties
Section titled “Late filing and late payment penalties”| How late | Late return | Late payment |
|---|---|---|
| 1 day | £100 | — |
| 30 days | — | 5% of tax unpaid |
| 3 months | £10 a day, up to £900 | — |
| 6 months | 5% of tax due or £300, whichever is more | Another 5% |
| 12 months | Another 5% or £300, whichever is more | Another 5% |
HMRC also charges interest on late tax. The £100 late filing penalty applies even if you owe nothing. If you’ve joined Making Tax Digital for Income Tax, a points-based penalty system replaces these.
Cash basis accounting: the default since 2024
Section titled “Cash basis accounting: the default since 2024”Under cash basis accounting, you record income when the money reaches you and expenses when you pay them. Under traditional (accruals) accounting, you record them when you invoice or receive a bill, and adjust for stock you haven’t sold.
From the 2024 to 2025 tax year, cash basis became the default for sole traders and the old turnover limit was removed. gov.uk now calls it the standard way to record income and expenses for sole traders. You can opt out and use traditional accounting instead, by saying so on your tax return.
What cash basis means for online sellers:
- Stock is deducted when you pay for it, even if it’s still on your shelf at the end of the tax year. A reseller who buys a big haul in March gets the deduction that year.
- Equipment is a normal expense. A camera, ring light, heat press or laptop is deducted in the year you pay for it, minus any personal use. No capital allowances needed.
- Platform payouts count when they reach you. If Etsy or Amazon holds a payout until after 5 April, it counts in the next tax year.
Traditional accounting may suit sellers with a lot of stock or who need formal accounts for a loan. Most small online sellers stick with cash basis.
Allowable expenses for online sellers
Section titled “Allowable expenses for online sellers”The basic test: the cost must be wholly and exclusively for your business. If something is used both privately and for the business, you can usually claim the business share. gov.uk’s expenses if you’re self-employed has the general rules. Here’s how they apply to online selling:
| Expense | Allowable? | What you can claim | What you can’t |
|---|---|---|---|
| Stock and materials | Yes | Goods bought to resell, yarn, silver, clay, fabric, ink, blanks | Items you take out of stock for yourself |
| Platform fees | Yes | Etsy listing, transaction and Offsite Ads fees, eBay final value fees, Amazon referral and FBA fees, Shopify and TikTok Shop fees | Fees on personal sales that aren’t part of your trade |
| Payment processing | Yes | PayPal, Stripe, Shopify Payments and SumUp fees | — |
| Postage and packaging | Yes | Postage you pay, boxes, mailing bags, tape, tissue paper, thank-you cards | Postage the buyer paid straight to the platform, which never passed through you |
| Shipping labels and printing | Yes | Label rolls, printer ink. The printer itself is equipment (below) | — |
| Photography kit | Yes | Camera, lens, lightbox, backdrops, ring light, props used for listings | The personal-use share of a camera you also use on holiday |
| Software and subscriptions | Yes | Bookkeeping software, Canva, Etsy Plus, listing tools, domain and website hosting | Personal streaming and app subscriptions |
| Advertising | Yes | Etsy Ads, eBay promoted listings, Meta and TikTok ads, flyers, business cards | — |
| Mileage | Yes | Business trips to the post office, suppliers, car boot sales and fairs at 55p a mile (first 10,000 miles) and 25p after, in 2026 to 2027 | Travel between home and a regular workplace, such as a rented studio. Parking fines and speeding tickets |
| Working from home | Partly | Flat rate: £10 a month for 25 to 50 hours, £18 for 51 to 100, £26 for 101 or more. Or a fair share of actual heating, electricity and rent | The flat rate if you work fewer than 25 hours a month at home |
| Phone and internet | Partly | The business share of your bill, worked out on a fair basis | The personal share. Not included in the home-working flat rate, so claim it separately |
| Craft fair and market stall fees | Yes | Pitch fees, table hire, public liability insurance for events | Food and drink for yourself at the fair |
| Equipment and tools | Yes | Sewing machine, kiln, heat press, laptop, shelving, label printer | The personal-use share |
| Training | Yes | Courses that update skills for your current business | Courses for a new, different business |
| Gifts to customers | Partly | Items carrying your logo, up to £50 per person per year. Free samples of products you sell | Food, drink or tobacco gifts |
| Clothing | Rarely | Protective clothing, such as an apron or safety goggles for a workshop | Everyday clothes, even if you only wear them for product photos or fairs |
| Entertaining | No | — | Meals and drinks with suppliers, collaborators or customers |
| Your own pay, tax and NI | No | — | Money you take out for yourself, Income Tax, National Insurance |
The mileage and home-working figures are HMRC’s simplified expenses flat rates. The car mileage rate rose from 45p to 55p for the first 10,000 miles from 6 April 2026. If you use the mileage rate for a vehicle, you can’t also claim its fuel, insurance or repairs, and you must keep using the mileage rate for as long as you use that vehicle in the business.
Capital allowances and the Annual Investment Allowance
Section titled “Capital allowances and the Annual Investment Allowance”Capital allowances are how businesses get tax relief on equipment they keep. For a sole trader on the cash basis they barely matter: you deduct equipment as a normal expense, as above. The one exception is a car, which you claim through capital allowances, unless you use the 55p mileage rate instead (gov.uk cash basis).
If you’ve opted out of cash basis and use traditional accounting, you claim equipment through capital allowances. The Annual Investment Allowance (AIA) lets you deduct the full cost of most equipment in the year you buy it, up to £1 million a year, which covers any small seller. Cars don’t qualify for the AIA. Either way, you reduce the claim for any personal use.
You can’t claim capital allowances at all if you use the £1,000 trading allowance.
Trading allowance or expenses?
Section titled “Trading allowance or expenses?”Once your sales are over £1,000, you choose each tax year between deducting your actual allowable expenses or a flat £1,000 trading allowance (partial relief). You can’t do both. If your expenses are over £1,000, claim them; if they’re under, the £1,000 usually wins. Resellers nearly always do better with expenses because stock is expensive. The trading allowance guide has worked examples of both.
Worked examples at 2026 to 2027 rates
Section titled “Worked examples at 2026 to 2027 rates”Example 1: a full-time jewellery maker
Section titled “Example 1: a full-time jewellery maker”Rhiannon makes silver jewellery in Swansea. She sells through Etsy, her own Shopify store and four craft fairs a year. She has no other income and uses cash basis. In the 2026 to 2027 tax year:
Sales: £38,000 (Etsy £22,000, Shopify £13,500, craft fairs £2,500, including postage customers paid)
| Allowable expense | Amount |
|---|---|
| Silver, stones and findings | £8,400 |
| Packaging (boxes, pouches, mailing bags) | £950 |
| Postage and shipping labels | £2,100 |
| Etsy fees (listing, transaction, payment processing, Offsite Ads) | £3,050 |
| Shopify subscription and payment fees | £1,180 |
| Instagram and Etsy advertising | £1,200 |
| Craft fair stall fees | £420 |
| New camera lens for product photos | £650 |
| Polishing motor and jewellery bench | £800 |
| Software (bookkeeping, Canva) | £240 |
| Phone and broadband: 40% business share of £600 | £240 |
| Working from home: 101+ hours a month, £26 × 12 | £312 |
| Mileage to fairs, suppliers and the post office: 1,200 miles × 55p | £660 |
| Total allowable expenses | £20,202 |
Taxable profit: £38,000 − £20,202 = £17,798
| Tax | Calculation | Amount |
|---|---|---|
| Income Tax | (£17,798 − £12,570) × 20% = £5,228 × 20% | £1,045.60 |
| Class 4 National Insurance | £5,228 × 6% | £313.68 |
| Class 2 National Insurance | Profit over £7,105, so treated as paid | £0 |
| Total for 2026 to 2027 | £1,359.28 |
Rhiannon’s bill is over £1,000 and none of it is collected through PAYE, so payments on account apply. If this is her first year in Self Assessment, she pays £2,038.92 on 31 January 2028 (her £1,359.28 bill plus a first payment on account of £679.64), then £679.64 on 31 July 2028.
She also needs to watch two thresholds. Her £38,000 turnover is over the Making Tax Digital for Income Tax thresholds (see records below). And it’s 42% of the way to the £90,000 VAT threshold, which is tested on turnover, so her expenses don’t reduce it.
Example 2: an employed trainer reseller
Section titled “Example 2: an employed trainer reseller”Marcus is a nurse in Nottingham, earning £34,000. He resells trainers on eBay and Vinted in his spare time and uses cash basis. In the 2026 to 2027 tax year:
Sales: £9,800
| Allowable expense | Amount |
|---|---|
| Stock bought (including £1,400 of pairs still unsold on 5 April) | £6,100 |
| eBay fees | £780 |
| Postage he paid on eBay sales | £540 |
| Boxes, mailing bags and labels | £120 |
| Mileage to outlets and sales: 600 miles × 55p | £330 |
| Phone: 20% business share of £480 | £96 |
| Total allowable expenses | £7,966 |
Under cash basis, Marcus deducts all £6,100 of stock in the year he paid for it, including the £1,400 still in his cupboard.
Taxable profit: £9,800 − £7,966 = £1,834
| Tax | Calculation | Amount |
|---|---|---|
| Income Tax | His salary uses his Personal Allowance. £34,000 + £1,834 is under £50,270, so 20% applies: £1,834 × 20% | £366.80 |
| Class 4 National Insurance | Self-employed profit under £12,570 | £0 |
| Class 2 National Insurance | Profit under £7,105, nothing to pay (his job already protects his NI record) | £0 |
| Total | £366.80 |
If he’d used the £1,000 trading allowance instead, his taxable profit would be £8,800 and his bill £1,760. Claiming expenses saves him £1,393.20.
His bill is under £1,000, so there are no payments on account. Because it’s also under £3,000 and he’s employed, filing online by 30 December 2027 lets HMRC collect it through his tax code in monthly instalments instead of one payment in January.
Records to keep, and for how long
Section titled “Records to keep, and for how long”You need records that back up every figure on your return. For an online seller that usually means:
- Sales, fee and payout reports from every platform, plus cash and card takings at fairs
- Receipts and invoices for stock, materials, equipment and other costs
- Bank and PayPal statements
- A mileage log: date, journey, purpose and miles
- A note of hours worked at home, if you use the flat rate
- How you worked out business shares of your phone, internet or home costs
Keep them for at least 5 years after the 31 January filing deadline for that tax year (gov.uk record keeping). For the 2026 to 2027 tax year, due on 31 January 2028, that means until at least the end of January 2033. Digital copies are fine.
Making Tax Digital for Income Tax
Section titled “Making Tax Digital for Income Tax”Making Tax Digital for Income Tax requires sole traders to keep digital records in compatible software, send HMRC quarterly updates and file their return through that software. It applies based on your qualifying income: your self-employment and property income before expenses (gov.uk eligibility). Salary doesn’t count.
| Qualifying income over | Measured in | Must use MTD from |
|---|---|---|
| £50,000 | 2024 to 2025 | 6 April 2026 |
| £30,000 | 2025 to 2026 | 6 April 2027 |
| £20,000 | 2026 to 2027 | 6 April 2028 |
So Rhiannon, with £38,000 of turnover, comes in from April 2027 if her 2025 to 2026 turnover was also over £30,000, and from April 2028 at the latest. Marcus, at £9,800, isn’t affected. The MTD for Income Tax guide covers software and quarterly deadlines.
Watch this date: all figures on this page are current as of 28 October 2026. The Autumn Budget 2026 is today, and we’ll update this page if it changes any rates, thresholds or rules covered here.
Where GoodVat fits
Section titled “Where GoodVat fits”GoodVat doesn’t do Income Tax. We don’t track your allowable expenses, prepare Self Assessment returns or submit Making Tax Digital for Income Tax updates. Bookkeeping software or an accountant handles that.
We handle VAT, which becomes the next problem for a growing shop. The VAT threshold of £90,000 is tested on turnover, so expenses don’t help you stay under it: Rhiannon’s £38,000 of sales count in full, whatever she spends. GoodVat:
- Tracks your rolling 12-month turnover across Etsy, Shopify, WooCommerce, Amazon, Square, Stripe and PayPal, and warns you before you reach £90,000
- Works from your exports for channels we don’t connect to directly, such as Vinted (eBay integration is coming soon)
- Registers you for VAT, calculates it on every sale, sends compliant invoices and files your Making Tax Digital VAT returns
- Connects to Xero, QuickBooks, Sage and Zoho Books, so your VAT figures line up with your books
What expenses can I claim as a self-employed online seller?
Section titled “What expenses can I claim as a self-employed online seller?”You can claim costs you pay wholly for your business: stock and materials, platform and payment fees, postage and packaging, advertising, software, craft fair stall fees, the business share of your phone and internet, mileage at HMRC’s flat rates and a flat rate for working from home. You can’t claim everyday clothing, entertaining, fines, or the personal share of anything you also use privately.
How do I know if my selling is a hobby or a business?
Section titled “How do I know if my selling is a hobby or a business?”HMRC looks at the badges of trade, such as whether you buy or make things in order to sell them at a profit, how often you sell, and whether you sell in an organised way. Selling your own unwanted belongings now and then is not trading. Regularly buying stock to resell, or making products to sell online, usually is.
When do I need to register as self-employed?
Section titled “When do I need to register as self-employed?”Register for Self Assessment by 5 October after the end of the tax year in which your gross trading income went over £1,000. For example, if you started selling in November 2026, during the 2026 to 2027 tax year, you must register by 5 October 2027. If you register late you may get a failure to notify penalty.
What is the Self Assessment deadline?
Section titled “What is the Self Assessment deadline?”For the 2025 to 2026 tax year, online returns and any tax owed are due by 11:59pm on 31 January 2027. Paper returns are due by 31 October 2026. If you make payments on account, the second one is due by 31 July. A late return gets an automatic £100 penalty, even if you owe no tax.
What is cash basis accounting?
Section titled “What is cash basis accounting?”Cash basis means you record income when money reaches you and expenses when you pay them, rather than when you invoice or get a bill. Since the 2024 to 2025 tax year it has been the default for sole traders, with no turnover limit. You can opt out and use traditional accounting if it suits your business better.
Can I claim for equipment like a camera or laptop?
Section titled “Can I claim for equipment like a camera or laptop?”Yes, if you use it for your business. Under cash basis you deduct equipment such as a camera, lightbox, printer or laptop as a normal expense in the year you pay for it, reduced for any personal use. Cars are the exception: they go through capital allowances, or you use the mileage rate instead.
Should I claim expenses or use the £1,000 trading allowance?
Section titled “Should I claim expenses or use the £1,000 trading allowance?”Claim expenses if your allowable costs are more than £1,000 in the tax year, which is usual for resellers who buy stock. If your costs are under £1,000, deducting the £1,000 trading allowance instead gives you a lower taxable profit. You can’t do both in the same year.
Related guides
Section titled “Related guides”- The £1,000 trading allowance: when you can skip expenses and earn tax-free
- Making Tax Digital for Income Tax: digital records and quarterly updates for sellers over £20,000
- Sole trader or limited company?: when it’s worth incorporating your shop
- Etsy tax for UK sellers: Income Tax, HMRC reporting and VAT on Etsy fees
- Vinted tax UK: when reselling on Vinted becomes taxable
- VAT threshold 2026: the £90,000 limit, tested on turnover, not profit
- Selling to UK customers: VAT rates, invoices and returns once you’re registered