How Does Tax Work on Etsy and Depop Income for UK Sellers in 2026/27?

If you sell handmade jewellery on Etsy or vintage clothing on Depop alongside a day job, the tax rules feel deceptively straightforward until you look closely at how fees work. Your payout is not your gross income. Your gross income is what the buyer paid, and the two figures are different on every platform in different ways.

Priya sells resin jewellery on Etsy and occasionally shifts pieces on Depop when she wants a faster sale. She knows she has a combined income from selling but has never been certain whether she is recording the right gross figure or which fees she can actually deduct. This post gives her, and you, the confirmed answer for 2026/27.

Do You Owe Tax on Etsy or Depop Income?

You owe tax on Etsy or Depop income when your combined gross trading income from all self-employment and selling activity exceeds £1,000 in the tax year. The £1,000 trading allowance applies to your total income across all platforms combined, not separately to each one. A seller with £800 on Etsy and £600 on Depop has combined gross income of £1,400 and sits above the threshold.

Above £1,000, you choose between claiming the flat £1,000 trading allowance or your actual expenses. Our complete expenses guide for online sellers includes the calculator that shows which route produces the lower tax bill for your specific numbers.

Priya's combined selling income for 2025/26 was £1,850 from Etsy, £2,100 from Vinted and £680 from craft fairs, a total of £4,630 gross. She is well above the threshold and has a tax liability. Her 5 October registration deadline for 2025/26 has either been met or missed, and acting before HMRC makes contact is the critical distinction for the penalty she faces.

What Is Your Gross Income on Etsy for Tax Purposes?

Your gross income on Etsy is the full amount the buyer paid including the item price, any shipping they were charged, and any gift wrapping. This figure appears in your Etsy payment account as the order total before any fees are deducted. It is not the amount Etsy paid out to your bank account.

The 6.5% transaction fee applies to the total order amount the buyer pays, including shipping. If you sell an item for £30 with £5 shipping, the 6.5% fee applies to £35, not £30. This means your gross income for tax purposes is also £35, not £30. Both figures, the gross income and the fee, need to be in your records separately.

The practical consequence is that sellers who record their Etsy bank payouts as income are understating their gross income by the total of all fees deducted. Etsy reports the gross figure to HMRC under DAC7. If your declared income is lower than what Etsy reported, you have a discrepancy.

Which Etsy Fees Are Deductible as a Business Expense?

All Etsy fees are allowable business expenses that reduce your taxable trading profit. For non-VAT-registered UK sellers, the 20% VAT Etsy adds on top of each fee is also deductible because it is an irrecoverable cost. You deduct what the fee actually cost you, not the pre-VAT figure.

The full list of deductible Etsy fees in 2026 is as follows.

Listing fee: £0.16 per item listed or relisted. Charged each time a listing goes live or auto-renews after a sale.

Transaction fee: 6.5% of the full order amount including shipping and gift wrapping, plus 20% VAT on top for non-VAT-registered sellers. Effective rate 7.8%.

Payment processing fee: 4% of the order total plus £0.20 per transaction, plus 20% VAT. Effective rate approximately 4.8% plus £0.24.

Regulatory operating fee: Approximately 0.25% to 0.48% of the order total depending on the period. Confirmed to have increased from June 2026. Check your Etsy payment account for the exact figure applied to your sales.

Offsite Ads fee: If your annual Etsy income exceeds £8,280, participation in Offsite Ads becomes mandatory and Etsy charges 12% on any sale generated through those ads. Below that threshold the feature is optional. If you opt in and a sale results from an ad click, 12% is charged on that sale.

How Does Depop Work Differently for Tax?

Depop removed its 10% selling commission for UK sellers in 2024. UK sellers now pay only a payment processing fee of 2.9% plus £0.30 per transaction. The buyer pays a protection fee on top of your listing price. Your gross income for tax purposes is your listing price, which is also essentially what arrives in your account before the small payment processing deduction.

This makes Depop materially different from Etsy and eBay for tax purposes. On Etsy, significant fees come out before your payout and need adding back to calculate gross income. On Depop, the payout is close to the listing price and the only deductible fee is the payment processing charge.

A Depop sale of a £40 vintage jacket works like this. Your gross income is £40. Depop deducts 2.9% plus £0.30, which is £1.46. Your payout is £38.54. Your deductible expense is £1.46. If you opted into Boosted Listings and the buyer found your item through a boost, Depop also charges 12% on that sale, which is a further £4.80 deductible expense.

The effective fee rate on Depop for a standard UK sale is approximately 3.7% of the listing price. Compared to Etsy's combined effective rate of approximately 12% to 14% including VAT on fees, Depop is significantly cheaper for sellers. That lower fee also means lower deductible expenses, so the net profit on a Depop sale tends to be higher at the same listing price.

Do Etsy and Depop Report Your Sales to HMRC?

Yes. Both platforms report seller data to HMRC automatically under the UK's DAC7 rules. Sellers are reported unless both conditions are met: fewer than 30 transactions in the calendar year and total consideration under approximately £1,700. If either threshold is exceeded, the platform reports your gross sales.

The figure reported is the gross transaction amount. For Etsy this is the full order value including shipping before any fees. For Depop this is the listing price the buyer paid.

HMRC cross-references this data against your Self Assessment return. If you sell across multiple platforms, each one reports independently and HMRC combines the data. Our post on how HMRC knows about your side hustle income covers the full data-matching picture including what HMRC does with the information it receives.

Priya's Etsy Tax Position for 2025/26

Priya's Etsy gross income for 2025/26 was £1,850. Her Etsy fees for the year were approximately £225 in combined transaction, processing, listing and regulatory fees including the VAT element. Her materials cost for the resin jewellery she sold was £390. Her other business costs including packaging and craft fair pitch fees totalled £325. Total actual expenses: £940.

Her Etsy taxable profit under actual expenses is £1,850 minus £940, which is £910. The trading allowance applied to Etsy income alone would produce £850 of taxable profit. Actual expenses produces a slightly lower figure on the Etsy income in isolation.

But Priya does not file Etsy in isolation. Her combined gross income from all sources is £4,630. Her combined actual expenses across all platforms are approximately £1,200. Her combined taxable trading profit under actual expenses is £3,430. The trading allowance applied to £4,630 produces taxable income of £3,630. Actual expenses wins by £200 of taxable income.

At her effective marginal rate of approximately 35 percent including income tax, Class 4 NI and student loan repayment on top of her marketing salary, that £200 difference saves her approximately £70 in tax. Modest but real.

The more significant issue for Priya is not the optimisation between the two routes. It is ensuring her gross income is recorded correctly on every platform, including the Etsy gross figure with shipping rather than the net payout, and that her records match what Etsy and Vinted already reported to HMRC.

The UK Online Seller Tax Template handles both calculations automatically and compares the two routes for her combined income rather than platform by platform.

Get the UK Online Seller Tax Template, £14.99 per year →

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