Received a Letter From HMRC About Your Online Sales? What It Means and What to Do.

A brown envelope from HMRC mentioning your online sales is enough to ruin anyone's morning. But a letter is not an investigation, and for many sellers the answer is a short reply explaining that their sales were never taxable in the first place. For others, it is a prompt to put something right, and the way you respond in the next few weeks makes a real difference to what it costs. This guide explains why HMRC is writing, what the letter does and does not mean, and exactly what to do in each situation.

Priya received hers on a Saturday. It said HMRC held information from online marketplaces showing she had been selling, and asked her to check her tax position within 30 days. She had been buying vintage clothing at markets and reselling it on Vinted and eBay for two years. She had never registered for Self Assessment, because she had never thought of it as a business. This article follows what she did next, and what it actually cost.

Why HMRC Is Writing to Online Sellers Now

Since 1 January 2024, online marketplaces have had to report seller information to HMRC every year under the reporting rules for digital platforms, often called DAC7. A platform reports you if you make 30 or more sales, or receive €2,000 (about £1,700) or more, in a calendar year. The report includes your name, address, date of birth, National Insurance number and your earnings for the year.

The volumes are large. According to figures obtained by the accountancy firm BDO through a Freedom of Information request, platforms reported almost 4 million sellers to HMRC for 2025, up from around 1.5 million for 2024. This is projected to be even higher for 2026. HMRC compares that data with its own records. Where someone appears to have significant sales but no Self Assessment return, it writes to them.

These are often called "nudge" or "one to many" letters. HMRC sends them in batches to many people at once. They are not personal investigations. They are a prompt to check your position and put it right if needed. Our guide to Vinted, your National Insurance number and HMRC explains the reporting in more detail.

First, Check the Letter Is Genuine

Scammers copy HMRC letters, emails and texts, especially when HMRC campaigns are in the news. Before you act:

Check how it arrived. HMRC campaign letters normally come by post. Be very wary of any email, text or phone call that claims to be about your online sales and asks you to click a link, pay immediately or give bank details.

Do not use contact details from a message you are unsure about. Find HMRC's contact details yourself on gov.uk.

Look for specifics. A genuine letter will have your name and address, usually your National Insurance number or Unique Taxpayer Reference, and a reference for the campaign.

What the Letter Usually Asks You to Do

HMRC's 2025 letters to online sellers said, in HMRC's words: "We have information that shows you've earned income from online marketplace sales" and "You need to tell us about this income. This is because you may owe tax."

HMRC’s nudge letters to online sellers for 2026 have started going out in batches, supported by data reported from digital marketplaces like eBay, Vinted, and Etsy

They asked people with income to declare to notify HMRC through the Digital Disclosure Service within 30 days of the date on the letter, and people with nothing to declare to contact HMRC within the same 30 days, quoting the reference at the top of the letter. Some letters give a specific reply date instead.

Some HMRC campaigns, including earlier letters to online sellers, have also included a form called a Certificate of Tax Position, with boxes to tick describing your situation. The certificate is not a legal requirement. It is a standard HMRC form, and it usually asks you to confirm that your tax affairs are correct overall, not just for the sales HMRC mentioned. Professional bodies, including the Chartered Institute of Taxation, have advised caution about signing it without checking your whole position first, and HMRC accepts a reply by letter instead. Whichever you choose, do reply. Ignoring the letter can lead to a follow-up, a formal compliance check or HMRC estimating what you owe.

The Four Situations, and What to Do in Each

1. You only sold your own belongings

Selling personal possessions for less than you paid is not usually trading, so there is normally no tax to pay. Platforms report you because you crossed their threshold, not because tax is due. Reply explaining that the sales were your own clothes, books or household items, and keep what evidence you have. The one exception is a valuable item: HMRC's guidance says that selling a personal possession, or a set of items, worth more than £6,000 may mean Capital Gains Tax is due. If you are unsure whether your selling counts as trading, our guide to whether you owe tax on your Vinted sales walks through the five questions that decide it.

2. You were trading, but under £1,000 a year

If you bought to resell or made items to sell, but your gross trading sales were £1,000 or less in every tax year, the £1,000 Trading Allowance covered you. Reply and explain, with your platform sales reports as evidence. Remember that the limit is measured on gross sales before fees and costs, not on profit, and covers all platforms combined.

3. You were trading and have already declared it

Reply to confirm that the income is on your Self Assessment returns. Before you do, compare the platform figures with what you declared. They will rarely match exactly, because platforms report calendar years and every sale, while your return covers 6 April to 5 April and only trading income. If something was missed, amend the return now.

4. You were trading over £1,000 and did not declare it

This is the situation the letters are aimed at, and it is more common than people think. Most sellers in this position simply did not realise their selling had become a business. There is tax to pay for each year your trading sales went over £1,000, but the process is manageable, and the cost is usually much lower than people fear.

The usual route is HMRC's Digital Disclosure Service:

Step 1: Notify HMRC that you want to make a disclosure. You do not need to give details at this stage.

Step 2: Work out the figures for each tax year: your gross trading sales, your allowable expenses, and the tax due. Claim every legitimate expense, such as stock, fees, postage and packaging. If your expenses were less than £1,000, claim the £1,000 Trading Allowance instead.

Step 3: Submit the disclosure within 90 days of HMRC acknowledging your notification, with an offer covering the tax, interest and penalty.

Step 4: Pay what you owe, or agree a payment arrangement with HMRC before you submit.

If your records are incomplete, our guide to filing Self Assessment with no records explains how to rebuild figures from platform reports and bank statements. If you also need to deal with the current year, our guide to the 5 October registration deadline explains how to register late for 2025/26.

How Penalties Work, and How to Keep Them Low

If you should have registered for Self Assessment and did not, HMRC can charge a failure to notify penalty. It is a percentage of the tax that was unpaid, and it depends on two things: whether the failure was deliberate, and whether you told HMRC before or after it contacted you.

Telling HMRC after receiving a letter is likely to be treated as a prompted disclosure. For a genuine mistake, these are the ranges from HMRC's own penalty factsheet:

Where you end up within each range depends on the quality of your disclosure: telling HMRC fully, helping it understand the figures and giving access to your records. A quick, complete and well-organised response moves the penalty towards the minimum. If you had a reasonable excuse for not registering, and told HMRC without unreasonable delay once it ended, there is no penalty at all. Penalties for deliberate failures are much higher, which is another reason to act on the letter rather than leave it.

Interest is also charged on late tax from the date it was due until it is paid.

What It Actually Cost Priya

Priya works full time, so her salary already uses her Personal Allowance. She pulled her sales reports from Vinted and eBay and found two tax years of trading:

Her total tax for the two years is £900. If HMRC accepts that her disclosure was full and helpful, the penalties could be as low as £122, plus interest. Her profits were well below £12,570, so no Class 4 National Insurance was due in either year.

Two things kept her bill down. First, she claimed her actual expenses, which were far higher than the £1,000 Trading Allowance in both years. Second, she acted before 31 January 2027, which keeps her 2024/25 tax inside the 12-month window where the minimum prompted penalty is 10% rather than 20%. Her 2024/25 tax was due on 31 January 2026.

She also kept selling in 2025/26, so she registered for Self Assessment straight away and will file that return by 31 January 2027. Our guide to payment on account explains why that first January bill can be larger than expected.

What Not to Do

Do not ignore the letter. It will not go away, and silence gives HMRC no reason to treat you favourably.

Do not reply with guesses. Get the platform reports first.

Do not sign the certificate without checking your whole position. It usually covers more than your online sales.

Do not forget your expenses. Stock, fees, postage and packaging can reduce the tax substantially. Our guide to expenses sole traders commonly miss covers the full list.

Do not assume the platform's total is your taxable income. It includes your own belongings, covers calendar years and is not the same as your trading profit.

The Most Important Thing

The letter feels like the worst part, but it is usually the start of a straightforward process. Sellers who only sold their own things reply and move on. Sellers who were trading and fell behind put it right, pay what they owe and leave it behind them. The ones who end up paying most are the ones who wait.

Reply by the date on the letter. Get the figures right. Claim every expense you are entitled to. And from this tax year onwards, keep records that let you answer any future letter in one short paragraph.

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