A brown envelope lands on the mat. It's from HMRC, it mentions your eBay or Vinted account, and it gives you a deadline. Your stomach drops.
Take a breath. A nudge letter is not a fine, and it usually is not a formal investigation. It's a prompt. HMRC has data about your online sales and wants you to check whether you owe any tax and, crucially, to reply.
This guide explains why you've been picked, what the letter actually means, and exactly how to respond, whether you owe nothing or you have something to put right. It's written for casual sellers and side-hustlers on platforms like eBay and Vinted, not just full-time businesses.
The one thing you must not do is ignore it.
What is an HMRC nudge letter and why did I get one? {#what-is-an-hmrc-nudge-letter}
A nudge letter (HMRC calls these "one to many" letters) is a prompt asking you to check your tax position and reply. It is triggered because, since 1 January 2024, online platforms have had to report seller data to HMRC, and your figures crossed the reporting threshold.
That data-sharing is the key thing to understand. New digital platform reporting rules mean marketplaces such as eBay, Vinted, Etsy, Airbnb and similar sites collect information about their sellers and send it to HMRC once a year.
A platform has to report you for a calendar year if you either sold at least 30 items, or were paid roughly £1,700 (the rule is set in euros, at EUR 2,000). The first reports, covering January to December 2024, were due to HMRC by the end of January 2025. (gov.uk)
The platform also has to give you a copy of what it sends HMRC, so you can check the figures. HMRC then matches that data against what people have declared, and where something looks off, a nudge letter goes out.
Important: being reported does not mean you owe tax. HMRC has been clear that there is no new tax for online selling, and the reporting threshold (30 items or about £1,700) is not the same as a tax threshold. Plenty of people who get a letter will owe nothing at all. They still need to reply.
Do I actually owe any tax on my online sales? {#do-i-owe-tax}
You owe Income Tax only if you are trading and your gross trading income for the tax year is more than the £1,000 trading allowance. Selling your own unwanted personal possessions is usually not taxable at all.
The trading allowance is £1,000 of gross income (that's your sales before you take off any costs) for the tax year, which runs 6 April to 5 April. If your total trading income across all your side activities is £1,000 or less, you generally do not need to tell HMRC. (gov.uk)
Three quick points that catch people out:
- It's gross, not profit. The £1,000 is measured before postage, packaging, platform fees or the cost of stock. £1,400 of sales is over the allowance even if you only made £200 of actual profit.
- It's combined. You add together income from all your trading and casual activities. Reselling on eBay plus a bit of dog walking plus content income all count towards the same £1,000.
- It's per tax year, per person. Each individual gets their own allowance.
If you go over £1,000, you have a choice. You can deduct the £1,000 trading allowance instead of your actual expenses, or you can deduct your real costs, whichever leaves you better off. You cannot do both.
What's the difference between selling personal stuff and trading? {#personal-vs-trading}
Talk to an e-commerce accountant →
This is the heart of almost every nudge-letter worry, so it's worth getting right.
Selling personal possessions means clearing out things you originally bought to use yourself: old clothes, the kids' outgrown toys, a sofa, a phone you've upgraded from. HMRC's position is that you probably do not have to pay Income Tax on these. You're not running a business, you're decluttering. (gov.uk)
There's one tax that can still bite here, and it's not Income Tax. If you sell a single personal possession (a "chattel") for £6,000 or more, Capital Gains Tax may be due on the gain. Your car is exempt. For most people clearing a wardrobe on Vinted, this never comes up, but a one-off sale of, say, an antique or some jewellery for over £6,000 can. (gov.uk)
Trading means you're buying or making things with the intention of selling them at a profit, or you're providing a service. Buying job lots to flip, making craft items to sell, dropshipping, or steady, organised reselling all point towards trading. (gov.uk)
HMRC looks at the whole picture rather than one single test. The longstanding indicators (often called the "badges of trade") include things like:
- Whether you bought the items intending to sell them on at a profit
- How often and how systematically you sell
- Whether you alter, repair or repackage items to make them more saleable
- How the sales are organised and funded
No single badge is decisive. Selling 30 of your own old DVDs is not trading. Buying 30 pairs of trainers to resell is.
Illustrative example: clearing the wardrobe vs running a shop {#illustrative-example}
Illustrative example. Two sellers, same tax year (2025/26), very different outcomes.
| Maya (declutter) | Sam (reseller) | |
|---|---|---|
| What they sold | Own used clothes and old kids' toys | Trainers bought in bulk to flip |
| Gross sales for the year | £1,950 | £4,200 |
| Cost of the items sold | Bought years ago for personal use | £2,100 |
| Is this trading? | No, personal possessions | Yes, buying to resell at a profit |
| Trading allowance relevant? | No | Yes |
| Income Tax due? | No | Yes, on the taxable profit |
Maya got a nudge letter because she sold well over 30 items, so the platform reported her. But she's just clearing out personal belongings, so she has no Income Tax to pay. Her job is simply to reply to HMRC and confirm there's nothing to declare.
Sam is trading. His gross sales of £4,200 are over the £1,000 trading allowance, so he must tell HMRC. He can either deduct the £1,000 allowance (leaving £3,200 to be taxed) or deduct his actual £2,100 of costs (leaving £2,100). Deducting real costs is better for Sam, so his taxable trading profit is £2,100.
How much tax that £2,100 attracts depends on Sam's other income, because trading profit sits on top of it. If Sam already earns over the £12,570 personal allowance for 2025/26 from a day job, and he's a basic-rate taxpayer, the £2,100 is taxed at the 20% basic rate, which is £420 of Income Tax. He'll also have Class 4 National Insurance to consider if his self-employed profits go over the £12,570 lower profits limit for 2025/26, which on these figures they don't. (gov.uk)
The figures are illustrative, but the logic is exactly how HMRC expects you to work it out.
How do I respond to the letter, step by step? {#how-to-respond}
The nudge letter gives you a window to reply, typically 30 days from the date on the letter, and a reference number. Here's a calm, ordered way through it.
1. Read the letter and note the deadline and reference. Don't panic over the wording. Find the date, the response window, and the reference number at the top. You'll need that reference whenever you contact HMRC.
2. Pull your platform records together. Download the seller report eBay or Vinted gave you, plus your own sales records for each tax year HMRC asks about. Remember HMRC's data is by calendar year, while tax is worked out by tax year (6 April to 5 April), so you may need to split the figures.
3. Decide which category you're in. Work through the test above. Are you selling personal possessions, or trading? If trading, is your gross income over the £1,000 allowance in any year?
4a. If you have nothing to declare, you still must respond. Contact HMRC using the method and reference on your letter to confirm your position. Do not simply bin it. HMRC has said that people who ignore these letters can expect a compliance check.
4b. If you do have undeclared income, you need to bring your tax affairs up to date (see the next section). If you've never filed before, you may also need to register for Self Assessment.
5. Get a second opinion if it's not clear-cut. The line between decluttering and trading, splitting calendar-year data into tax years, and choosing allowance versus expenses are all easy to get wrong under deadline pressure. If you're unsure, our tax advisory team can review your position before you reply.
If you sell regularly enough that you suspect you're trading, our pages for eBay sellers and Vinted sellers walk through what counts as a business and what you can claim.
What if I do owe tax for previous years? {#what-if-i-owe-tax}
If you should have declared trading income and didn't, the cleanest route is usually a voluntary disclosure to HMRC. Coming forward yourself, rather than waiting to be chased, generally means lower penalties.
The mechanics, in short:
- If you needed to file but never have, you must register for Self Assessment. The deadline to register is 5 October following the end of the relevant tax year. (gov.uk)
- To disclose income from earlier years, you can use HMRC's voluntary disclosure service. You notify HMRC, and once they acknowledge it, you normally have 90 days to work out, disclose and pay what you owe. HMRC will generally agree more time for genuinely complex cases. (gov.uk)
The amount you'll pay is the tax, interest, and a penalty that depends on your behaviour (an innocent mistake is treated very differently from deliberately hiding income). Getting the disclosure right, and presenting the reason for the error well, can make a real difference to the penalty. This is a good point to get professional help.
Will the rules change with the new £3,000 threshold? {#new-3000-threshold}
You may have seen headlines about a £3,000 figure. Here's the accurate version, because it's widely misreported.
The Government has announced a plan to raise the Self Assessment reporting threshold for trading income from £1,000 to £3,000, with the stated intention of delivering it within this parliament. As things stand, this is an announced proposal, not yet in force, and there will be a new simpler online way to report income in the £1,000 to £3,000 band.
Two things matter for anyone with a nudge letter today:
- The £1,000 trading allowance is unchanged. You can still earn up to £1,000 of gross trading income tax-free.
- The proposal changes whether you need a full tax return, not whether tax is due. If you owe tax on profits, you'll still owe it. The £3,000 figure does not mean the first £3,000 is tax-free.
Until the change is law, work to the rules that apply now: the £1,000 trading allowance and the Self Assessment requirements above.
Frequently asked questions {#faqs}
Does getting a nudge letter mean I'm being investigated?
No. A nudge letter is a prompt, not a formal investigation or a penalty. HMRC is asking you to check your position and reply. Ignoring it, though, can lead to a compliance check, so always respond by the deadline on the letter.
I only sold my own old clothes on Vinted. Do I owe anything?
Almost certainly not. Selling your own unwanted personal possessions is generally not taxable for Income Tax. The exception is Capital Gains Tax, which can apply if you sell a single item for £6,000 or more (your car is exempt). You still need to reply to the letter to confirm you have nothing to declare.
How much can I earn from selling online before I pay tax?
If you're trading, you can earn up to the £1,000 trading allowance in gross income (before costs) in a tax year before you have to tell HMRC or pay Income Tax. Above £1,000 you must report it, and you can deduct either the £1,000 allowance or your actual expenses, whichever is better.
The platform reported me but I'm under £1,000. Why did I get a letter?
Because the platform's reporting threshold (30 items sold, or roughly £1,700 in a calendar year) is not the same as the tax threshold. You can be reported without owing any tax. Reply to HMRC to confirm your figures and that you have nothing to declare.
What's the deadline to respond to an HMRC nudge letter?
These letters typically give you 30 days from the date on the letter. Check your own letter for the exact deadline and the reference number, and use the contact method it specifies. If you need more time to gather records, contact HMRC before the deadline rather than going silent.
I think I owe tax for past years. What should I do first?
Don't rush a guess into HMRC. Gather your records, work out which tax years are affected, and consider a voluntary disclosure, which usually means lower penalties than being chased. Because penalties hinge on how you present the position, it's worth speaking to an accountant before you submit anything.
Ready to reply with confidence?
A nudge letter is manageable, but the deadline is real and the personal-versus-trading line is genuinely tricky. If you'd rather have an expert check your figures and draft your response, book a call with a Zmartly accountant through our tax advisory services. We'll tell you straight whether you owe anything and handle the reply for you.
Sources {#sources}
- Information for online sellers (HMRC)
- Check if you need to tell HMRC about your income from online platforms (HMRC)
- Tax-free allowances on property and trading income (HMRC)
- Capital Gains Tax: what you pay it on (HMRC)
- Who must send a Self Assessment tax return (HMRC)
- Make a voluntary disclosure to HMRC: your guide to making a disclosure (HMRC)
- Income Tax rates and Personal Allowances (HMRC)
