Why HMRC Is Cracking Down on Side Hustles

The Rise of the Digital Marketplace Economy

Ten years ago, selling online was niche. Today? Everyone’s at it. From second-hand trainers to full-blown resale businesses, HMRC has realised something important: billions are moving through digital platforms, and a chunk of it isn’t being declared.

Is your Side-Hustle Taxable?

Check your HMRC status for 2026 in 60 seconds.

HMRC Status Check 2026

Do your total sales exceed £1,000 gross?

Include everything you sold on eBay, PayPal, and Stripe before fees.

Export your 2026 Fees to HMRC

Join 200+ UK sellers automating their fee tracking for the February launch.

Why Platforms Like eBay and PayPal Are in the Spotlight

HMRC isn’t chasing individuals one by one anymore. Instead, they’re going straight to the source. Platforms like eBay and PayPal now act as data pipelines, automatically reporting seller activity. Think of it as tax surveillance—but legal and unavoidable.

Section 1: The “1,707 Rule”

What Is the £1,707 Threshold?

From January 2026, eBay and PayPal must report your activity to HMRC if either of the following applies in a calendar year:

  • You earn £1,707 in gross sales, or
  • You complete 30 or more transactions

Hit just one of those? You’re on HMRC’s radar.

The 30-Transaction Rule

This one catches people off guard. You could sell 30 low-value items and never touch £1,707—and still get reported. Volume matters just as much as value.

Why HMRC Chose These Numbers

They didn’t pick them randomly. These thresholds mirror international tax reporting standards and are designed to flag patterns, not just profits.

Who Will Be Reported to HMRC Automatically?

Casual Sellers vs Regular Sellers

Sold your old phone and a couple of jackets? Probably fine. Sold items every month, even casually? That’s where things blur.

What Data eBay and PayPal Will Share

Expect HMRC to receive:

  • Your name and address
  • Total gross income
  • Number of transactions
  • Account identifiers

No context. No explanations. Just raw numbers.

Section 2: The “Gross vs. Net” Trap

Understanding Gross Income

Here’s the kicker: HMRC only sees gross income. That’s the full amount a buyer pays before fees, refunds, or postage.

Why HMRC Ignores Platform Fees

Fees are your responsibility to declare as expenses. HMRC won’t subtract them automatically because they don’t know what you paid unless you prove it.

A Real-Life £100 Sale Example

You sell an item for £100.

  • PayPal takes £3.50
  • eBay takes £12

You receive £84.50. HMRC? They see £100.That gap is where most sellers get caught out.

Where Most Side Hustlers Go Wrong

Assuming Fees Are Automatically Deducted

They’re not. Ever. If you don’t track them, you overpay tax.

Not Keeping Proper Records

No records = no deductions. HMRC doesn’t do “trust me.”

Where Your SaaS Fits In

Why Manual Tracking No Longer Works

Spreadsheets are fine… until they aren’t. One missed fee, one lost invoice, and your numbers fall apart.

Automating Profit Calculations

Call to Action: Use our calculator below to see your true profit, or join our waitlist for the “Tax-Ready” automatic exporter that does it all for you—fees, totals, and HMRC-ready summaries.

Hobbyist vs Trader – Know the Difference

Hobbyist: When There’s No Tax to Pay

Selling your own stuff—old clothes, books, gadgets—for less than you paid? That’s not trading. No tax due.

Trader: When HMRC Expects a Return

Buying items specifically to resell for profit? That’s trading. And if your gross income exceeds £1,000, you must report it.

Examples That Make It Clear

  • Selling old DVDs = hobby
  • Buying trainers to flip = trader

Intent matters.

How to Calculate Your True Profit

Income Minus Allowable Expenses

Allowable expenses include:

  • eBay fees
  • PayPal fees
  • Postage
  • Packaging
  • Cost of goods sold

Common Deductible Costs for eBay Sellers

If it helped you make the sale, it probably counts

How to Stay Compliant Without Stress

Simple Record-Keeping Habits

  • Save monthly statements
  • Keep digital receipts
  • Track every sale

Filing Your Self Assessment Correctly

Once registered as self-employed, declare honestly. HMRC already has the headline numbers.

What Happens If You Ignore the Rules

Penalties and Investigations

Undeclared income can trigger:

  • Backdated tax bills
  • Interests
  • Penalties

Why “They Won’t Notice” Is a Bad Bet

They already noticed. That’s the whole point of the new rules.

Smart Tax Planning for Side Hustlers

When to Register as Self-Employed

If you’re trading and over £1,000 gross—don’t wait.

When to Talk to an Accountant

If your side hustle stops feeling “small,” professional advice pays for itself.

The Future of Side Hustle Tax in the UK

More Automation, Less Privacy

Reporting will only expand. Expect tighter integration and faster checks.

What Sellers Should Expect After 2026

Real-time data. Fewer excuses. More compliance.

Final Thoughts

Side hustles aren’t disappearing—but anonymous selling is. The HMRC 2026 rules don’t mean higher taxes by default. They mean better records, clearer rules, and fewer surprises. Get organised now, and you stay in control.

Frequently Asked Questions (FAQs)

1. Will HMRC tax me automatically once I hit £1,707?

No. Reporting doesn’t equal taxation. You’re taxed based on profit, not gross sales.

2. Do refunds count toward the threshold?

Yes. Thresholds are based on gross transaction values before refunds.

3. What if I sell across multiple platforms?

Each platform reports separately, but HMRC can combine the data.

4. Is PayPal reporting personal transfers?

No. Only payments marked for goods and services.

5. Can I reduce my tax bill legally?

Absolutely. Claim every allowable expense and track everything.