How much tax does a UK Etsy seller pay? 2026/27 worked examples

A UK Etsy seller pays Income Tax and Class 4 National Insurance on profit, not on sales. In the 2026/27 tax year, a sole trader in England with no other income pays nothing on the first £12,570 of profit, then 20% Income Tax and 6% National Insurance on profit up to £50,270. The worked examples below show what that means at £20,000, £50,000 and £90,000 of Etsy sales.

The figures used in these examples

• Tax year 2026/27, seller living in England, trading as a sole trader, with no employment or other income
• Personal Allowance: £12,570
• Income Tax: 20% on profit from £12,570 to £50,270, 40% above that
• Class 4 National Insurance: 6% on profit from £12,570 to £50,270, 2% above that
• Costs of 45% of sales, covering Etsy fees, materials, packaging and postage. Your own margin will differ, so replace this with your real figures.

Worked examples at three sales levels

Etsy sales	Costs (45%)	Profit	Income Tax	Class 4 NI	Total tax	Tax as % of sales
£20,000	£9,000	£11,000	£0	£0	£0	0%
£50,000	£22,500	£27,500	£2,986	£895.80	£3,881.80	7.8%
£90,000	£40,500	£49,500	£7,386	£2,215.80	£9,601.80	10.7%

£20,000 of sales: no tax, but you still need to register

Profit of £11,000 sits below the Personal Allowance, so no Income Tax or National Insurance is due. You still need to register for Self Assessment and file a return, because your trading income is above the £1,000 trading allowance. Register by 5 October after the end of the tax year in which you started selling.

£50,000 of sales: a tax bill of £3,881.80

Profit of £27,500 is £14,930 above the Personal Allowance. Income Tax at 20% is £2,986 and Class 4 National Insurance at 6% is £895.80. Because the bill is over £1,000, HMRC will also ask for payments on account towards the following year, each worth half of this year’s bill. In the first year this can mean paying around one and a half times the bill by 31 January.

£90,000 of sales: close to the VAT threshold

Profit of £49,500 gives Income Tax of £7,386 and Class 4 National Insurance of £2,215.80, a total of £9,601.80. The bigger issue at this level is VAT. Once your taxable turnover passes £90,000 in any rolling 12 months, you must register. If your prices stay the same, up to one sixth of your sales then goes to HMRC as VAT, less the VAT you pay on your own costs. On £90,000 of standard-rated sales, that is up to £15,000 a year before any reclaim. Our VAT returns service covers registration and quarterly filing once you pass the threshold.

Making Tax Digital for Etsy sellers

Making Tax Digital for Income Tax applies from April 2026 to sole traders with qualifying income over £50,000, from April 2027 to those over £30,000 and from April 2028 to those over £20,000. Qualifying income means sales, not profit, and HMRC uses the figures from an earlier tax return to decide when you join. Under Making Tax Digital you keep digital records and send quarterly updates to HMRC through compatible software.

HMRC already sees your Etsy sales

Online marketplaces, including Etsy, now report seller income to HMRC each year. The only sellers left out are those making fewer than 30 sales and receiving less than about £1,700 (2,000 euros) in the year. If your Etsy income is not on your tax return, HMRC can compare the two.

Five ways Etsy sellers overpay or underpay tax

• Recording the payout that reaches your bank as your sales figure. Your sales are the gross amount before Etsy fees, and the fees are then claimed as a cost.
• Forgetting smaller costs such as packaging, postage labels, Etsy Ads and Offsite Ads fees.
• Not keeping records of materials and stock, which makes cost of sales hard to prove.
• Missing payments on account, which leads to interest on the unpaid amount.
• Registering for VAT late, which means paying the VAT due from the date you should have registered, often out of your own profit.

When a limited company is worth comparing

Around £50,000 of profit, the total tax for a limited company, taking salary, dividends and Corporation Tax together, can come out lower than for a sole trader. The answer depends on how much you need to draw, your other income and your plans for the business, so it is worth running both sets of figures before you change structure.

Get your figures checked

NDCA works with UK Etsy sellers and other e-commerce businesses. We reconcile your Etsy payouts, work out your real profit and file your return, for one fixed monthly fee with a named accountant.

Frequently asked questions

Do I pay tax on Etsy sales if I only sell a few items?

If your total trading income from all sources is £1,000 or less in the tax year, the trading allowance means you do not need to report it. Above £1,000 you must register and file, even when your profit sits under the Personal Allowance.

Is Etsy income taxed on sales or profit?

On profit. Etsy fees, materials, packaging and postage all come off your sales first.

When does an Etsy seller need to register for VAT?

Once VAT-taxable sales pass £90,000 over the past 12 months, or will pass that figure within the next 30 days alone.

Does Etsy report my income to HMRC?

Yes. Every year, apart from sellers with under 30 sales and less than about £1,700 in receipts.