A letter from HMRC about your online selling is worrying, but it's usually a request to check, not an accusation. This guide takes you through it in order. The Vinted tax checker has a letter option that gives you the same steps with your own answer.
What is an HMRC nudge letter?
A nudge letter is a letter HMRC sends when its data suggests you may have income it hasn't been told about. For online sellers, that data now includes the reports that apps like Vinted, eBay, Etsy and Depop send HMRC about busier sellers each year.
The letter usually asks you to check whether you need to pay tax on that income and to reply. HMRC's online-selling letters have asked for a reply within 30 days. Always go by the date on your own letter.
A letter means HMRC has data on your sales. It doesn't by itself mean you owe tax. Many people who sell only their own old things will owe nothing.
Step 1: check it's really from HMRC
Scammers copy HMRC letters, emails and texts. Before you reply or pay anything:
- check the letter against HMRC's list of genuine contacts
- don't use phone numbers or links from an email or text you weren't expecting
- never give bank details or passwords in reply to an unexpected message
Step 2: work out which group you're in
- You only sell your own old things. Selling personal possessions usually isn't trading, so there's usually nothing to pay, however many things you sell. One item or set over £6,000 may need a Capital Gains Tax check.
- You buy or make things to sell, and buyers paid you £1,000 or less in each tax year. The trading allowance usually covers you.
- You buy or make things to sell, and you went over £1,000 in a tax year. You usually needed to register as self-employed and file a return for that year.
If you're not sure whether you're trading, HMRC uses the badges of trade to decide.
Step 3: how to respond to an HMRC nudge letter
- If you don't think you owe anything, reply and say why, briefly and accurately. For example, that you were selling your own used clothes.
- If you think you do owe tax, tell HMRC. Full, accurate and quick answers keep any penalty lower.
- If you need more time, contact HMRC before the deadline rather than letting it pass.
Keep a copy of everything you send, and a note of what you sold and where it came from.
The certificate of tax position
Some letters include a "certificate of tax position" asking you to confirm your tax affairs are in order. You don't have to sign it. Never sign it, or any declaration, unless you're sure every part is true. If in doubt, get advice first.
What happens if you ignore it?
Ignoring the letter can lead to a formal check of your tax affairs. It's far better to reply, even if your answer is that you owe nothing.
When to get help
Get advice before you reply if:
- more than one tax year may be involved
- you might owe a significant amount
- you're not sure whether you were trading
- you're on Universal Credit, which has its own reporting rules
Free help is available from charities for people on lower incomes, and you can also use a qualified accountant. The Low Incomes Tax Reform Group has a guide to finding free or paid tax advice.
Common questions
Will I get a fine? Not automatically. A letter isn't a penalty. If you do owe tax, penalties depend on the circumstances, and they're lower when you tell HMRC fully and promptly.
Does it mean HMRC thinks I'm cheating? Not necessarily. The letters go out based on data, and many people who get one owe nothing. But it does mean HMRC wants you to check, so reply by the date on the letter.
Is HMRC checking my Vinted sales? HMRC receives yearly reports from selling apps about sellers over the reporting limits. The Vinted National Insurance number guide explains what's in them.