Do you need to do a tax return for your Etsy shop?

Running a handmade or craft shop on a marketplace like Etsy usually is trading, because you are making or sourcing products to sell for profit. That means the trading allowance and Self Assessment rules are likely to apply to you. Check your position below, then use our profit calculator to see what you actually keep after fees.

Answer a few quick questions and get a clear answer for your situation.

Do I need to tell HMRC? What’s my real profit?

Etsy selling is usually trading

Because handmade and craft sellers make or buy products specifically to sell, their activity normally meets the definition of trading. The good news is the trading allowance covers the first £1,000 of gross income each tax year tax-free. Above that, you generally need to register for Self Assessment and declare your profit.

Registering for Self Assessment

If your trading income exceeds £1,000 in a tax year, you should usually register for Self Assessment with HMRC by 5 October after the tax year ends. You then file a return reporting your income and allowable expenses, and pay tax on the profit according to your overall circumstances. Keeping good records of sales, fees and material costs from the start makes this far easier.

Your real profit after marketplace fees

Marketplace fees — listing fees, transaction fees, payment processing and optional advertising — can take a meaningful slice of each sale. You only pay tax on profit, not turnover, so understanding your true margin matters for both your finances and your tax return. Our profit calculator breaks down fees and estimates a tax set-aside so there are no surprises.

Keeping records and claiming expenses

You can deduct legitimate business expenses — materials, postage, marketplace fees, and a proportion of home running costs if you work from home — to reduce your taxable profit. Just remember that if you use the £1,000 trading allowance instead of deducting actual expenses, you cannot also claim expenses on the same income. Keep receipts and a simple spreadsheet of income and costs.

Frequently asked questions

Do I need to do a tax return for my Etsy shop?
If your gross trading income from the shop exceeds £1,000 in a tax year, you generally need to register for Self Assessment and file a return. Below £1,000 the trading allowance usually covers it.
Can I deduct Etsy fees from my tax?
Yes — marketplace and payment fees are allowable business expenses that reduce your taxable profit, provided you are not instead claiming the £1,000 trading allowance for the same income.
What is the £1,000 trading allowance?
It is a tax-free allowance on the first £1,000 of gross trading or property income each tax year. If your Etsy sales stay below it you usually do not need to report them.
How do I work out my real Etsy profit?
Start with your sales, then subtract listing, transaction and processing fees, materials, postage and other costs. Our free profit calculator does this for you and estimates a tax set-aside too.
When do I need to register for Self Assessment?
Usually by 5 October following the end of the tax year in which your trading income first exceeded £1,000. Filing and payment deadlines then follow the standard Self Assessment calendar.
Will Etsy report my sales to HMRC?
Under platform-reporting rules, marketplaces report sellers above the £1,700 / 30-sale thresholds. For an established shop this is likely, but reporting is not the same as owing tax.

Not sure where you stand? Use the free checker — no login, about 60 seconds.

Check my tax position