{"id":5982,"date":"2020-07-17T15:14:52","date_gmt":"2020-07-17T14:14:52","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=5982"},"modified":"2024-03-28T16:40:54","modified_gmt":"2024-03-28T16:40:54","slug":"the-tax-guide-to-sell-on-etsy","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/the-tax-guide-to-sell-on-etsy\/","title":{"rendered":"The tax guide to sell on Etsy"},"content":{"rendered":"\n<p>Calling all crafty creatives. Do you know your tax obligations when you sell on Etsy?<\/p>\n\n\n\n<p>Take a look at our guide where we cover who needs to pay, what you should pay and how much you might owe.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Do I pay tax when I sell on Etsy?<\/h2>\n\n\n\n<p>As a general rule, you pay tax when selling on Etsy if you\u2019re running a business. If you use Etsy as a hobby business, the chances of you having to pay tax are lower. But it depends how much money you make.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>I\u2019m employed and sell on the side<\/li>\n\n\n\n<li>I\u2019m not employed but I sell on Etsy<\/li>\n\n\n\n<li>Etsy is my main source of income<\/li>\n<\/ul>\n\n\n\n<p>If you\u2019re employed and sell on the side, you\u2019re covered by the <a aria-label=\"undefined (opens in a new tab)\" href=\"https:\/\/taxfix.com\/en-uk\/glossary\/trading-allowance\/\" target=\"_blank\" rel=\"noreferrer noopener\">Trading Allowance<\/a>. It lets you earn up to \u00a31,000 on top of your salaried income, tax-free. This is in sales though, not profit. If you make anything more than this, you\u2019ll be taxed on the portion you make over \u00a31,000.&nbsp;<\/p>\n\n\n\n<p>Take a look at our <a href=\"https:\/\/taxfix.com\/en-uk\/calculator\/employed-self-employed-tax\/\" target=\"_blank\" aria-label=\"undefined (opens in a new tab)\" rel=\"noreferrer noopener\">Employed and Self Employed tax calculator<\/a> if you need a hand working out what you owe.&nbsp;<\/p>\n\n\n\n<p>If you\u2019re not employed or self-employed but you sell on Etsy &#8211; so it\u2019s just a hobby &#8211; you generally won\u2019t need to pay tax on your income. You can earn up to \u00a312,570 tax-free because of the <a aria-label=\"undefined (opens in a new tab)\" href=\"https:\/\/taxfix.com\/en-uk\/glossary\/personal-allowance\/\" target=\"_blank\" rel=\"noreferrer noopener\">Personal Allowance<\/a>.<\/p>\n\n\n\n<p>If you\u2019re self-employed and Etsy is your main source of income, you\u2019ll have to pay tax as you would on any income. To distinguish between a hobby business and a business for profit, here are 5 key defining features of a business for profit:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>You buy wholesale to get your stock to sell<\/li>\n\n\n\n<li>You make or buy items purely to sell them on<\/li>\n\n\n\n<li>You&#8217;re selling regularly and for profit<\/li>\n\n\n\n<li>You\u2019ve created (or are creating) a brand for yourself<\/li>\n\n\n\n<li>You\u2019re registered as a business on Etsy (which is a pretty big clue!)<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">What tax do I pay?<\/h2>\n\n\n\n<p>There are three types of tax that you\u2019ll need to pay:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/income-tax\/\" target=\"_blank\" aria-label=\"undefined (opens in a new tab)\" rel=\"noreferrer noopener\">Income Tax<\/a><\/li>\n\n\n\n<li><a aria-label=\"undefined (opens in a new tab)\" href=\"https:\/\/taxfix.com\/en-uk\/glossary\/class-2-national-insurance\/\" target=\"_blank\" rel=\"noreferrer noopener\">Class 2 National Insurance<\/a> (scrapped from 6 April 2024)<\/li>\n\n\n\n<li><a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/class-4-national-insurance\/\" target=\"_blank\" aria-label=\"undefined (opens in a new tab)\" rel=\"noreferrer noopener\">Class 4 National Insurance<\/a><\/li>\n<\/ul>\n\n\n\n<p>The Income Tax that you pay is dependent on what you earn from your sales. Below are the rates that you will have to pay for the 2024\/25 tax year.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>What you earn<\/td><td>Tax band<\/td><td>Tax rate<\/td><\/tr><tr><td>Up to \u00a312,570<\/td><td>Personal Allowance<\/td><td>0%<\/td><\/tr><tr><td>\u00a312,571 to \u00a350,270<\/td><td>Basic Rate<\/td><td>20%<\/td><\/tr><tr><td>\u00a350,271 &#8211; \u00a3125,140<\/td><td>Higher Rate<\/td><td>40%<\/td><\/tr><tr><td>Over \u00a3125,141<\/td><td>Additional Rate<\/td><td>45%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>To calculate what you owe in Income Tax, you can also <a href=\"https:\/\/taxfix.com\/en-uk\/calculator\/income-tax\/\" target=\"_blank\" aria-label=\"undefined (opens in a new tab)\" rel=\"noreferrer noopener\">use our handy calculator<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is National Insurance?<\/h2>\n\n\n\n<p>National Insurance is tax that we all pay, whether we\u2019re self-employed or paid by an employer. What you pay depends on how much you earn and your tax status.<\/p>\n\n\n\n<p>It accounts for things like your State pension, the NHS and care systems as well as social benefits like JSA, the Maternity Allowance etc. Take a look at <a href=\"https:\/\/www.gov.uk\/national-insurance\/what-national-insurance-is-for\">HMRC\u2019s full list <\/a>here.<\/p>\n\n\n\n<p>As a member of the self-employed workforce (what a title!), you\u2019ll pay Class 4 National Insurance when you earn over \u00a312,570.&nbsp;&nbsp;<\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-highlight-mini m-yellow m-align-left\">\n    <div class=\"b-block-body\">\n        <p class=\"p1\"><span class=\"s1\">\ud83d\udea8<\/span><b>From 6 April 2024 <\/b>(the 24\/25 tax year onwards),\u00a0<a href=\"https:\/\/www.gov.uk\/government\/publications\/changes-to-national-insurance-contributions-from-6-january-2024\/a-reduction-in-the-main-rates-of-primary-class-1-and-class-4-national-insurance-contributions-and-the-removal-of-the-requirement-to-pay-class-2-nation\"><span class=\"s2\">Class 2 National Insurance is being scrapped<\/span><\/a>. If you\u2019re under the threshold and pay them voluntarily to qualify for benefits, you\u2019ll still be able to do so.<\/p>\n<p>At the same time, Class 4 is reducing from 9% to 6%.<\/p>\n\n    <\/div>\n<\/div> <!-- .b-highlight-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"embed-container\"><iframe loading=\"lazy\" title=\"Tax in10(ish) seconds - what is National Insurance?\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/JWaGOotrXVI?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/div>\n<\/div><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">What can I expense when I sell on Etsy?<\/h2>\n\n\n\n<p>When it comes to expenses, you should apply common sense when deciding what to deduct. HMRC will accept any reasonable business expense that you have, as long as you have evidence of the cost.&nbsp;<\/p>\n\n\n\n<p>Make sure to keep all your receipts or even make a spreadsheet of them at the start of every tax year.<\/p>\n\n\n\n<p>Common expenses when you sell on Etsy:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Etsy seller fees<\/li>\n\n\n\n<li>Events space hire (like a market stall, a pop-up shop, working space)<\/li>\n\n\n\n<li>Accounting costs<\/li>\n\n\n\n<li>Equipment to make your products (e.g. if you\u2019re selling masks, expense the material you buy to make them)&nbsp;<\/li>\n\n\n\n<li>Card processing charges<\/li>\n\n\n\n<li>Marketing costs&nbsp;<\/li>\n\n\n\n<li>Photography costs (e.g. if you promote your shop and products on Instagram)<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Other taxes to pay<\/h2>\n\n\n\n<p>If you earn over \u00a390,000 in a year, you\u2019ll be required to register for and pay VAT &#8211; Value Added Tax. This is another form of tax that\u2019s added on most goods and services in the UK, currently taxed at 20%.&nbsp;<\/p>\n\n\n\n<p>VAT is taken from the customer via the seller and then paid straight to HMRC. In other, much fancier, words, the seller is essentially collecting and remitting the money to HMRC.&nbsp;<\/p>\n\n\n\n<p>Corporation tax is a tax paid by businesses based on their yearly profits. It\u2019s also known as company tax. And yes, if you\u2019ve set up your Etsy as an LTD company and you\u2019re making a profit, you\u2019ll need to pay it.&nbsp;&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Calling all crafty creatives. Do you know your tax obligations when you sell on Etsy? Take a look at our guide where we cover who needs to pay, what you should pay and how much you might owe.&nbsp; Do I pay tax when I sell on Etsy? As a general rule, you pay tax when [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[446,440],"tags":[414,356,348,137,411],"class_list":["post-5982","post","type-post","status-publish","format-standard","hentry","category-independent-retail-business","category-self-employed-tax-returns","tag-employment-status","tag-expenses","tag-income-tax","tag-national-insurance","tag-self-employed"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The tax guide to sell on Etsy &#8211; Taxfix<\/title>\n<meta name=\"description\" content=\"Here&#039;s everything you need to know about your Etsy shop and tax. 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