First: breathe. The brown envelope is designed to get your attention, and it has. But a nudge letter is not a fine, not an accusation, and not a court summons. It is HMRC saying: "We've received information suggesting you've earned money selling online, and we can't see it in your tax records. Please look into it."
Why now? Since January 2024, platforms like eBay, Vinted, Etsy, Depop and Airbnb have been required to report their sellers' income to HMRC. The first batches of that data landed in January 2025 and January 2026, and HMRC has been writing to sellers ever since. So the letter usually doesn't mean someone reported you or that HMRC has decided you're guilty of anything. It means a computer matched platform data against tax records and flagged a gap worth asking about.
I know exactly what that envelope feels like, because a few years ago HMRC opened a discovery assessment into my old eBay electronics side-hustle — several tax years of it, with records scattered across PayPal exports, bank statements and marketplace screenshots that didn't agree with each other. I rebuilt everything by hand, sent it in, and HMRC accepted the figures. This guide is the calm, ordered version of what I learned. It is not tax advice — I'm not an accountant — but it is a tested method for getting from panic to a response you can stand behind.
What not to do
Three mistakes make everything worse. Don't ignore it. Silence doesn't make it go away; it tends to escalate to estimated assessments — where HMRC guesses your income, rarely in your favour — plus penalties. Don't guess figures. A made-up number you can't evidence is worse than a late, accurate one. And don't sign anything you don't understand. Some letters include a "certificate of tax position" asking you to formally declare your affairs are in order. You're generally not legally required to complete that specific form, but a false declaration on it is serious — most advisers suggest getting professional advice before signing one. Not ignoring the letter and not rushing the certificate are two different things; do the first, be careful with the second.
Step 1 — Work out what kind of letter you've got
They're not all the same, and the type sets your urgency level.
- A one-to-many "nudge" letter — the most common. Generic wording, sent in batches, prompting you to check whether you should have declared income. Serious, but the gentlest of the three.
- A letter with a certificate of tax position — as above. Treat with care; consider advice before signing.
- A formal enquiry or discovery assessment — cites specific legislation (an enquiry under s9A, or a discovery assessment under s29), often names tax years and sometimes figures. This was my situation. It's the most serious of the three, and the point where professional help earns its fee.
Whatever it is, note the reply-by date. Nudge letters usually give around 30 days — but check yours, because it varies.
Step 2 — Were you actually trading?
This is the question everything else hangs on, and it's genuinely possible the answer is no.
Selling your own belongings is not trading. Clearing out your wardrobe, your kids' old toys, the exercise bike you never used — that's not taxable income, however much it fetched. (One niche exception: individual rare or valuable items sold for over £6,000 can raise capital-gains questions — think collectables, not old jumpers.)
Buying or making things in order to sell them is trading. HMRC looks at what it calls the badges of trade — in plain English: did you buy things intending to resell them? Do you sell regularly rather than as a one-off clear-out? Do you repair, improve or bundle items to increase the price? Do you list in a business-like way? The more of those describe you, the more likely you were trading. My electronics flipping ticked most of them; that's why the enquiry had teeth.
If you were trading, the £1,000 trading allowance is the next line: if your total gross trading income was £1,000 or less in a tax year, there's normally no tax and nothing to report. Over £1,000 — even by a pound — and you're into self-assessment territory for that year.
Step 3 — Gather everything before you calculate anything
The instinct is to jump straight to "how much do I owe?" Resist it. Numbers come last; evidence comes first. For each tax year the letter covers (a UK tax year runs 6 April to 5 April), download:
- PayPal activity export (CSV) — if you sold in the PayPal era, this is the richest record: gross amounts, fees, refunds, dates.
- Bank statements (CSV or PDF) for every account money landed in.
- Platform reports — eBay, Vinted and Etsy all let you download sales histories, and platforms must give you a copy of what they reported to HMRC.
- Anything on costs — receipts, postage records, mileage notes, screenshots of what you paid for stock. Imperfect is fine; absent is the problem.
You need all three money views — platform, PayPal, bank — because they disagree with each other by design, and the disagreement is exactly what you'll be explaining.
Step 4 — The gross-vs-net trap (the one that catches everyone)
Here's the mistake I see constantly, because it's the one I nearly made. You sell something for £100. eBay takes its fee, postage comes out, and £82.95 lands in your account. Which number is your income?
£100. HMRC wants gross income declared — the full amount the buyer paid — with the fees and postage claimed separately as expenses. Add up your bank deposits instead, and every figure downstream is wrong, and it's wrong in a way that looks like under-declaring.
The good news: the fees don't vanish — they come back as deductions. But income and expenses must be kept separate, each traceable to a statement line. That separation is most of what "good records" means.
Step 5 — Expenses: this is where money stays in your pocket
If you were trading, costs of the trade generally reduce your taxable profit — and in my case, evidencing them properly is what turned a frightening headline figure into a manageable one. Categories worth gathering evidence for, if they apply to you:
- Stock — what you paid for the things you sold, including cash purchases if you can evidence the pattern (my bank's ATM withdrawals mattered here).
- Platform and payment fees — eBay final value fees, PayPal fees. Already in your exports.
- Postage and packaging — labels, boxes, tape. It adds up more than you think.
- Mileage — trips to the post office, to collect stock. HMRC publishes flat rates per mile, which makes this one mechanical.
- Tools and repairs — parts and equipment used for the trade.
- Use of home — there are published flat rates for working from home, or a reasonable proportion of actual costs.
One honest boundary: what's ultimately allowable in your specific case is a judgement call, and that's accountant territory — the wrong move is claiming nothing because organising it felt hard. Gather and organise the evidence for everything plausible; let a professional confirm the edges. (Note: if you use the £1,000 trading allowance for a year, you can't also claim expenses for that year — it's one or the other, whichever leaves you better off.)
Step 6 — Respond before the deadline, even if you're not finished
A response doesn't have to be perfect to be on time. If you genuinely can't rebuild everything before the date, contact HMRC (the letter has a number) and ask for more time — a specific, credible request usually lands far better than silence. When you do respond: keep it factual and calm, state what you sold and when, present your figures with the evidence behind them, and don't volunteer speculation. If it turns out you do owe tax for past years, there are established voluntary-disclosure routes for putting it right, and coming forward is treated very differently from being chased — an accountant can tell you which route fits.
When to bring in a professional
You can handle a simple nudge letter yourself if the sums are small and the records are recoverable. Get professional help when: the letter includes a certificate of tax position; it's a formal enquiry or discovery assessment; multiple years are involved; or the amounts are large enough that the fee is cheap insurance. And here's the part that makes everything above worth doing either way: accountants bill for time, and most of the bill is untangling. Walk in with organised exports, separated income and expenses, and a gross-to-net trail, and you're paying for judgement instead of admin.
Want the templates that carried my own response?
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Quick answers
Do I owe tax if I only sold my own belongings?
Usually not. Selling your own possessions generally isn't trading and isn't taxable income — though rare items sold for over £6,000 can raise capital-gains questions. Tax enters the picture when you buy or make things in order to sell them.
How many years back can HMRC go?
It depends on behaviour: broadly 4 years in ordinary cases, 6 where there's carelessness, and up to 20 for deliberate non-disclosure. Your letter will usually say which years HMRC is interested in — start with those.
Will responding trigger a full investigation?
No guarantees exist, but engaging clearly and factually generally puts you in a far better position than silence — non-response is what tends to escalate to estimated assessments and penalties.