What Etsy really takes from a £12 sale, and what to put aside for HMRC

A £12 sale on Etsy does not put £12 in your bank account. For a UK seller who is not VAT registered it puts £9.99 there, and if the buyer arrived through an Etsy Offsite Ad it puts £7.83 there. Most people selling alongside a job know the 6.5% transaction fee and stop counting, which is why the payout always feels smaller than the maths said it would.

The second half of the problem arrives later. If you have a salary, your personal allowance is already used, so every pound of Etsy profit is taxed at your marginal rate from the first pound. That is not a reason to stop selling. It is a reason to know the two numbers, what Etsy takes and what to put aside for HMRC, before the shop grows.

This article works through both on one £12 sale, then on a full year. Every Etsy rate and every tax figure in it was checked against Etsy's fee policy and GOV.UK on 29 September 2026.

What Etsy takes from a £12 sale

Take a £12 digital download sold to a UK buyer from a shop that is not VAT registered. Five separate charges come off before the payout, and the total is £2.01, or 16.7% of the sale, which you can check for your own prices with the free Etsy fees UK calculator. Here is each line.

Two of those lines are the ones people miss. The listing fee is billed in dollars, $0.20 per listing, and converted on the day, so it lands at roughly 15p to 16p rather than a fixed pence figure; it is charged again after every sale of a multi-quantity listing, so on a small item it matters. And the VAT line is not a fee Etsy invents: it is the UK rate of 20% applied to the four fees above it.

The VAT point needs one more sentence, because it is the fact most guides get wrong. Etsy charges VAT on its fees to UK sellers unless the seller has a valid VAT number saved on their Etsy account, in which case it stops. That is Etsy's own treatment and it does not carry across to other marketplaces, so do not assume the same rule applies elsewhere.

The same sale through an Offsite Ad

Etsy advertises listings on Google, Facebook, Instagram and Pinterest, and if a buyer clicks one of those adverts and orders within 30 days, Etsy adds an Offsite Ads fee of 15% of the order. It drops to 12% once a shop has passed $10,000 of sales in the previous 365 days, at which point the programme also becomes compulsory. Below that figure you can switch it off in Shop Manager under Marketing.

On the £12 sale the effect is stark. Total fees rise from £2.01 to £4.17, which is 34.7% of the sale, and the payout falls from £9.99 to £7.83. A product priced to make £3 of profit on an ordinary order loses money on an Offsite Ad order, and the seller does not choose which orders come that way.

The seven Etsy fees, in one table

Etsy's fee policy runs to seven charges for a UK shop. Two of them, Etsy Ads and Offsite Ads, are optional or conditional; the other five apply to every order.

One thing that is not on the list: VAT on the sale itself. For a digital download sold to a UK or EU buyer, Etsy adds VAT to the price the buyer sees, collects it and pays it to the tax authority. It does not come out of your listed price, so the £12 in the example is the £12 the fees work from.

The tax side, when you sell alongside a job

The fees are the visible cost. The tax is the one that arrives months later, and for an employed seller it works differently from the way most Etsy guides describe it, because those guides are written for people whose shop is their only income.

If you have a job, the personal allowance, the first £12,570 you can earn tax free, is already used by your salary. So Etsy profit is not taxed at zero until it reaches £12,570. It is stacked on top of your salary and taxed at your marginal rate, the rate on the top slice of your income, from the first pound.

Profit that straddles two bands is split. Take a £45,000 salary and £7,814 of Etsy profit in the year. The first £5,270 of that profit sits inside the basic rate band and is taxed at 20%; the remaining £2,544 tips into the 40% band. The income tax bill on the Etsy profit is £2,071, which is 26.5% of it, and you can run your own salary and profit through the free self-assessment tax calculator to see where yours lands.

Two things follow. A shop that looks like it makes £650 a month of profit is really making about £480 a month once the tax is counted, and that gap is what makes a second income feel less profitable than the shop's own numbers suggest. And the tax is not taken at source the way PAYE is, so the money sits in your account looking like yours until the bill arrives.

The £1,000 trading allowance, and when to register

The threshold that decides whether HMRC needs to hear from you at all is the £1,000 trading allowance, and it is measured on gross sales in the tax year: everything buyers paid you, before Etsy's fees come off. Under £1,000 of gross sales, you normally do not need to tell HMRC about the income, though you should keep the records anyway.

Over £1,000, you register for Self Assessment. The deadline is 5 October after the end of the tax year, so for the year ending 5 April 2027 that is 5 October 2027. Registering is free and takes about ten minutes online, and the penalty for missing the date is the easiest one to avoid.

Once registered, you choose one of two routes for the return, and you cannot use both. Either deduct the £1,000 allowance from your gross sales and pay tax on the rest, or deduct your actual expenses, meaning Etsy fees, product costs, postage, packaging and software, and pay tax on the profit. For a low-cost shop such as digital downloads the allowance often wins; for a shop that buys stock, actual expenses usually win.

One coming change is worth knowing about without over-reading it. The government has said the threshold for filing a return for trading income will rise from £1,000 to £3,000 later this parliament. It is not in force, no start date has been published, and the £1,000 tax free allowance itself is not changing.

National Insurance: usually nothing

Two classes of National Insurance apply to the self-employed, and for most people selling alongside a job both come to nothing. Class 4 is 6% on self-employed profit between £12,570 and £50,270 and 2% above that, and it looks only at your Etsy profit, not your salary. If your Etsy profit for the year is under £12,570, Class 4 is zero.

Class 2 has been voluntary since 2024, at £3.65 a week. Once your profit reaches £7,105 it is treated as paid at no cost and your National Insurance record is protected. Under £7,105 you already have a full year's record from your job, so there is nothing to do.

The habit: move the money on payout day

The tax on a second income is a January problem only if you let it become one. The habit that works is simple: on the day an Etsy payout lands, move the set-aside share into a separate savings account and leave it there. For the seller on £45,000 above, that share is a little over a quarter of profit; rounding it up to 30% gives room for a good month.

Payments on account catch people in year two. Once a Self Assessment bill is over £1,000 and mostly not taxed at source, HMRC asks for half of next year's estimated bill in advance, on 31 January and again on 31 July, on top of this year's. If the shop is growing, put a little more aside than the current year's rate suggests.

Will Etsy report you to HMRC?

Since January 2024, Etsy has had to send HMRC the details and sales of sellers who make 30 or more sales, or about £1,700 of sales, in a calendar year. Either threshold triggers it, and the report goes the following January. Note the unit: a calendar year, not a tax year, and sales, not profit.

Being reported is not a tax bill. It means HMRC can compare Etsy's figures with your return, and if your records match there is nothing to worry about. Where it does matter is for someone who has been trading for a while without registering: the sensible move is to work out the figures and register now, before the report arrives first.

Making Tax Digital, and when it reaches a side shop

Making Tax Digital for Income Tax requires sole traders above a threshold to keep digital records and send HMRC quarterly updates. The threshold is qualifying income, which means self-employment plus property income, measured gross rather than as profit. It became compulsory above £50,000 in April 2026, drops to £30,000 in April 2027 and to £20,000 in April 2028.

Most shops run alongside a job are under it, and a spreadsheet that logs every order already counts as a digital record. The point of knowing the dates is that a shop turning over £1,700 a month crosses the 2028 line, and gross sales grow faster than profit.

The two numbers, side by side

On a £12 sale, Etsy keeps £2.01 and you receive £9.99, or £7.83 if the order came through an Offsite Ad. On the profit that is left after your own costs, an employed seller on a £45,000 salary owes about 26.5% in income tax, moved aside on payout day and paid by 31 January 2028. Neither number is a reason not to sell. Both are reasons to price from the payout, not the list price, and to treat the tax share as never having been yours.

If you want this worked out for every order, the Etsy seller profit and tax spreadsheet does it, with the tax set-aside built in.

Build first. Leave second. Choose third. Start with the assessment →