How to Start Selling Online as a UK Sole Trader

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Turning the Idea Into a Business

Selling online as a UK sole trader has real advantages: low setup costs, simple tax arrangements, and full control. It also carries obligations that catch new sellers out, particularly around when you have to tell HMRC, what the marketplaces are already telling HMRC about you, and what rights your customers have when they buy from a website rather than a shop.

This covers each of those in order, from registration to returns.

Step 1: Tell HMRC, at the Right Point

The £1,000 Trading Allowance Is Gross, Not Profit

This is the detail most guides get wrong. The trading allowance is £1,000 of gross trading income, meaning your sales before any costs, not your profit.

Sell £3,000 of stock that cost you £2,200 and you have £800 of profit but £3,000 of gross income. You are over the line and you must register.

The £1,000 also covers all your trading activity added together, so an Etsy shop and a bit of freelance work count as one figure.

The Registration Deadline

You must register by 5 October following the end of the tax year in which you started trading, which is later than it sounds. Start selling in June 2026 and you are in the 2026/27 tax year, which ends on 5 April 2027, so your deadline is 5 October 2027, with the first return due by 31 January 2028.

Register through GOV.UK with a Government Gateway account. HMRC issues a Unique Taxpayer Reference by post, so allow time for it rather than leaving registration until the deadline. Keep the UTR safe; you will use it every year.

Registering even below the threshold can be worth it for National Insurance record purposes, though that depends on your wider circumstances.

The £3,000 Change You Have Probably Read About

The government has announced that the Self Assessment reporting threshold for trading income will rise from £1,000 to £3,000 gross. Two things about that.

It is not in force. For 2026/27 the £1,000 figure still decides whether you register.

And it is a reporting change, not a tax-free allowance. The trading allowance stays at £1,000. Once the new threshold arrives, people earning between £1,000 and £3,000 will report through a simpler online service instead of a full return, but the tax position is unchanged.

What the Marketplaces Already Tell HMRC

Since January 2024, digital platforms including eBay, Etsy, Vinted and Amazon report seller data to HMRC. The reporting trigger is roughly 30 sales or around £1,700 in a year.

That is a disclosure rule for the platform, not a tax threshold for you. HMRC receives the data whether or not you file, and the £1,000 gross trading allowance is what decides your obligation. Selling your own second-hand possessions is not trading and is not taxed.

VAT

VAT registration becomes compulsory once your VAT-taxable turnover passes £90,000 in any rolling twelve-month period, or when you expect to pass it in the next 30 days alone. The deregistration threshold is £88,000. Below that, registration is voluntary and worth considering mainly if you sell to VAT-registered businesses.

Step 2: Choose Where to Sell

Marketplaces

eBay, Amazon, Etsy and Vinted give you an audience immediately, with fast setup and no traffic problem to solve.

The cost is the commission and the loss of control. Fee structures differ by platform and category, and they change, so check the current rate card rather than a figure in an article. As a rough shape, expect a percentage of each sale plus a fixed element, and for some platforms a listing fee as well.

Marketplaces suit testing whether a product sells, hobbyists, and anyone who does not want to build a site yet.

Your Own Store

Shopify, Wix, Squarespace and WooCommerce put you on your own domain with control over design, data and checkout. The cost is that traffic becomes your problem.

Monthly costs vary and move with promotions. Hosted platforms typically start somewhere in the £17 to £25 a month range, while WooCommerce itself is free but needs WordPress hosting and more technical confidence. Check current pricing directly before budgeting.

The sensible path for most new sole traders: start on a marketplace to validate the product, add your own store once you know what sells, and run both for a while.

Step 3: Payment Processing

Marketplace selling bundles payment processing into the platform’s fees, usually with a small percentage and fixed charge on top of the selling fee.

On your own site you connect a processor directly. Stripe, PayPal, Square and Shopify Payments are the common UK choices, typically charging a percentage plus a fixed amount per transaction, with rates varying by card type and whether the card is UK-issued. On a £50 sale, a rate of 1.5% plus 20p works out at 95p, which sounds trivial until you multiply it by a year of orders.

Two things worth pricing that sellers routinely miss. International cards usually cost more than domestic ones. And if you take payment in another currency, conversion is charged on top: PayPal, for example, charges 3% above its base exchange rate on business account balances.

Do not run this through a personal account. Most personal account terms prohibit business use, and mixing transactions makes your records considerably harder to untangle. See our guide to business bank accounts for sole traders.

Step 4: Distance Selling and Consumer Rights

Two sets of rules apply when you sell to consumers online, and most guides only mention the first.

The Consumer Contracts Regulations 2013

Customers buying online have 14 days from receiving the goods to cancel for any reason, with no fault required. You cannot remove this in your terms.

Once they tell you they are cancelling, they have a further 14 days to return the goods, and you must refund within 14 days of receiving them back or of proof they were sent.

The refund includes the standard outbound delivery cost you charged. You can withhold the extra if they chose a premium delivery option, and you can require them to pay return postage if you said so clearly before purchase. You cannot charge a restocking fee.

Before someone buys, you must give them your name and a business address, a description of the goods, the total price including tax and delivery, your cancellation and returns policy, and delivery arrangements. Get this wrong and the cancellation window extends to 12 months and 14 days.

Some goods are exempt from the right to cancel, including personalised or made-to-order items, perishables, sealed hygiene products once opened, and digital downloads once accessed. You must tell customers clearly before they buy, and for digital content they must acknowledge it.

The Consumer Rights Act 2015

Separate from cancellation, goods must be of satisfactory quality, fit for purpose and as described. If they are not:

• The customer has a short-term right to reject within 30 days of delivery for a full refund
• After that, you get one opportunity to repair or replace
• If that fails, they can claim a price reduction or reject the goods

This applies regardless of any returns policy you write, and it is the rule that bites when a product arrives faulty rather than simply unwanted.

Step 5: Records, From the First Sale

Keep records of all sales income with dates and amounts, all business expenses with receipts, your drawings from the business, and bank statements covering business activity. Sole traders must keep these for five years after the 31 January filing deadline for the tax year concerned.

You will use them for Self Assessment, reporting profit and paying Income Tax and Class 4 National Insurance, with online filing due by 31 January.

Making Tax Digital Is Already Running

Making Tax Digital for Income Tax is not a future deadline. It has applied since 6 April 2026 to sole traders and landlords with qualifying income above £50,000, drops to £30,000 in April 2027 and £20,000 in April 2028.

Qualifying income is gross, before expenses, which for an online seller means your sales total rather than your profit. That catches people who think of themselves as small.

Inside the regime you keep digital records, send four quarterly updates due 7 August, 7 November, 7 February and 7 May, and file a Final Declaration by 31 January through compatible software rather than the old Self Assessment service.

Even below the threshold, set up digital records now. FreeAgent, QuickBooks and Xero all handle it, and FreeAgent is free with NatWest, RBS, Ulster Bank and Mettle business accounts, with Mettle requiring one transaction a month. See our accounting software comparison for sole traders.

FAQ

Do I need to register with Companies House?

No. Sole traders register with HMRC only. Companies House is for limited companies, which is a separate decision about liability and tax.

Can I sell online without telling HMRC if sales are small?

If your gross trading income stays at or below £1,000 across everything you sell, the trading allowance covers you. Above that you must register, even if you made very little profit.

Will HMRC find out about my marketplace sales?

Probably. Platforms have reported seller data since January 2024, at around 30 sales or £1,700 a year. That reporting is not an allowance and does not replace your own obligation.

What name can I trade under?

Your own or a business name, but not one implying incorporation, such as Limited, Ltd or PLC, and not one too close to an existing trademark. Your real name and a contact address must appear on your website and invoices.

Do I need insurance?

Not by law for selling online, but product liability cover is worth serious thought if you sell physical goods, since liability for defective products can attach to the seller. Check what any policy actually covers before assuming you are protected.

Selling Online as a UK Sole Trader: The Bottom Line

Get the foundations right and the rest is commerce. Register with HMRC once your gross trading income passes £1,000, remembering that gross means sales rather than profit and that the £3,000 figure in the headlines is a future reporting change rather than a new allowance.

Understand both sets of consumer rules: 14 days to cancel for any reason under the distance selling regulations, and 30 days to reject faulty goods under the Consumer Rights Act.

Keep clean digital records from the first sale, because Making Tax Digital is already live above £50,000 and the thresholds are coming down each year.

Start on a marketplace, keep a separate business account, and move to your own store when you know what sells.

This article is general information about UK tax and consumer law, not advice, and it does not take account of your circumstances. Thresholds, fees and regulations change. Prices and platform fees quoted are indicative and should be confirmed with the provider. Speak to a qualified accountant about your own tax position.