A reminder that HMRC is gunning for online retailers. Perhaps this isn’t surprising when one considers the statistics. The UK’s Centre for Retail Research reports that the retail online market share “shot up from 10.6% (2012) to 26.5% (2022)” and it has only risen higher again in the last two years. The thing to remember if you run even a small, online business is that digital platforms are now required to collect and report seller information and income to HMRC – for the year to January 2024 platforms are required to report by 31st January 2025. Moreover, the UK can now access information from platforms operating not just within the UK but also within 51 other countries as well. Whether you’re scaling a side hustle into a proper business or adding online sales to your existing operation, this data sharing changes everything. The casual approach of “it’s just a bit of extra income” no longer works when HMRC has direct access to your platform data. But here’s what most people miss: this isn’t necessarily bad news if you understand how to work with it.
The Business maturity question
The first thing to understand is where you sit on the business spectrum, because the tax implications are completely different.
Casual disposal of personal items: Selling your old MacBook or clearing out your wardrobe isn’t trading. You’re disposing of personal assets, usually at a loss. No tax implications.
Trading activity: Buying items to resell, sourcing inventory, or operating with profit intent. This is where the £1,000 trading allowance becomes relevant.
Established business adding online channels: If you already run a business and add eBay, Amazon, or Etsy as sales channels, this income gets absorbed into your existing business tax calculations.
The key is being honest about which category you’re in, because trying to stay in the wrong category when HMRC has your platform data is a losing game.
Scaling considerations
But here’s where it gets strategic: once you’re consistently above this threshold, you need to start thinking like a proper business anyway. The administrative burden of tracking expenses for Self Assessment isn’t much different from proper business bookkeeping. If you’re growing an online operation, there are several thresholds to monitor:
£1,000 profit annually: Self Assessment required if exceeded
£85,000 annual turnover: VAT registration becomes mandatory
£100,000+ profit: You’re into higher-rate tax territory and should definitely have professional advice
The mistake many founders make is treating these as separate hurdles rather than planning for the progression. If you’re serious about scaling online sales, build systems that work at higher volumes from the start.
Cross-platform strategy
With HMRC accessing data from 51 countries, your multi-platform strategy needs tax consideration from day one. Selling on Amazon UK, eBay internationally, and direct through your website creates multiple data streams flowing to HMRC. The sophistication required to manage this properly is why many successful online businesses transition to limited company structures sooner than they initially planned.
The professional transition point
Here’s what typically happens with successful online sellers: there’s usually a moment when tax considerations start driving business decisions instead of the other way around. You’re spending significant time on tax compliance, your profits justify professional fees, and you’re making business decisions based on tax efficiency. Smart founders recognise this transition early and build businesses that can scale through it, rather than trying to optimise for staying small.
Systems that scale
The businesses that handle this transition well treat it as a systems upgrade, not a compliance burden.
They implement:
- Proper bookkeeping from the start (not just spreadsheets)
- Clear separation between business and personal transactions
- Regular financial reviews rather than year-end panic
- Ongoing relationships with accountants before they’re desperate
The growth mindset shift
What separates successful founders from perpetual side-hustlers in this space is mindset. Instead of asking “how do I minimise tax?”, they ask “how do I build a business that justifies professional tax planning?” Instead of trying to stay under thresholds, they plan for crossing them profitably. Instead of seeing HMRC’s increased oversight as a threat, they see it as validation that online commerce is now a legitimate, regulated business sector worth building in.
Strategic takeaways
- Know your category: Personal disposal, trading, or business The tax treatment is completely different.
- Plan for progression: If you’re growing, build systems that work at scale rather than optimising for staying small.
- Embrace professional structure: The businesses that thrive in this new environment treat tax compliance as a business system, not an annual hassle.
- Consider timing: With platform data flowing to HMRC automatically, ignorance stops being a viable strategy. Better to professionalise early than scramble later.
The founders who get this right see HMRC’s increased oversight as market validation – proof that online commerce has matured into a sector worth building serious businesses in. The ones who struggle are still trying to operate like it’s 2015.
Which approach fits your ambitions?
