Materials, Etsy fees, packaging & postage — tracked in one app
Buy clay, fabric, beads from your suppliers. Pay Etsy listing & transaction fees. Print Royal Mail labels. Replace your kiln element. All in one place.
Tiny material bills, hundreds of orders — and Etsy now reports your gross to HMRC
A typical UK Etsy seller pays for materials weekly, lists products at $0.20 each, gets hit with a 6.5% transaction fee on every sale, pays a payment-processing fee on top, prints postage labels through Royal Mail Click & Drop or Evri, refreshes packaging, and pays for working space (a kitchen table, a spare room or a shared studio). Since 1 January 2024 Etsy is required to report your gross sales directly to HMRC — your tax return must reconcile against what Etsy has already told them.
What PocketReceipt tracks for Etsy sellers
Materials & supplies
Clay, fabric, beads, wax, fragrance oils, polymer clay, paint, ink, wood, leather. The biggest single line.
Etsy & platform fees
$0.20 listing fee, 6.5% transaction fee, payment processing, Etsy Ads. Same logic for eBay, Folksy, Vinted, Amazon Handmade.
Packaging & postage
Boxes, tissue, ribbon, padded envelopes, branded stickers. Royal Mail, Evri, DPD, Click & Drop labels.
Equipment
Kilns, sewing machines, Cricuts, laser cutters, 3D printers, soldering kit, jewellery tools. Capital-allowance flagged.
Studio & workshop costs
Studio rent at an artist's collective, shared maker space membership, dedicated home-workshop apportionment.
Software & design tools
Adobe Creative Cloud, Procreate, Canva Pro, Etsy Pattern, Shopify, Erank. Subscriptions allowable in full.
A typical Etsy seller's week, tracked
- Monday — order fresh clay and glazes from a pottery supplier, scan receipt
- Tuesday — list 12 new products, Etsy listing fees auto-captured ($0.20 each)
- Wednesday — buy a new kiln element, capital-allowance flagged
- Thursday — print Royal Mail Click & Drop labels for 25 orders, batch receipt
- Friday — restock branded boxes, tissue paper and ribbon from a packaging supplier
- Sunday — reconcile Etsy + Shopify monthly reports against bank, export to accountant
Allowable expenses for self-employed Etsy sellers
HMRC lets you deduct any cost that is wholly and exclusively for your craft business. The table below maps a typical maker's spend — materials, Etsy fees, packaging, postage, equipment, studio rent — to the boxes on SA103F (self-employment full pages). The biggest single line for most sellers is the cost of materials (Box 17). Etsy fees are a separate line from payment-processing fees — both are allowable.
| Expense | Claim? | SA103F box | Notes |
|---|---|---|---|
| Materials & raw supplies — clay, glazes, fabric, beads, wax, fragrance oils, wicks, paint, ink, wood, leather, resin | Yes | Box 17 — Cost of goods bought for resale or goods used | The biggest single line for most makers. Keep every supplier receipt — wholesale orders from places like Bath Potters, Crafty Devils, Hobbycraft Trade, Just Smelly Soaps all go here. |
| Packaging — boxes, tissue paper, ribbon, branded stickers, padded envelopes, gift bags, thank-you cards | Yes | Box 17 | Direct cost of fulfilling orders. Tracks per-order or in bulk. |
| Postage — Royal Mail Click & Drop, Evri, DPD, parcel forwarders | Yes | Box 17 / Box 20 | Cost of physical fulfilment. Royal Mail Click & Drop monthly statements are easy to reconcile. |
| Etsy listing fees ($0.20 per listing every 4 months) and Etsy transaction fees (6.5% of sale price) | Yes | Box 30 — Other business expenses | Report GROSS sales as turnover (Box 15), then claim Etsy fees as a separate expense — Etsy reports your gross to HMRC under the digital platforms reporting rules. |
| Etsy Payments processing fees (typically 4% + £0.20 per UK transaction) | Yes | Box 26 — Bank, credit card and other financial charges | Easy to miss — they're netted off before the deposit reaches your bank. Pull Etsy's monthly fee summary to capture them all. |
| Other-platform fees — eBay, Folksy, Vinted, Amazon Handmade, Depop, NotOnTheHighStreet | Yes | Box 30 | Same logic as Etsy. All these platforms now report your GROSS to HMRC under the digital platforms reporting rules in force since 1 January 2024. |
| Card-processor fees on your own Shopify / WooCommerce / Square site (Stripe, PayPal, GoCardless) | Yes | Box 26 | Typically 1.5-2.5% on direct sales. Netted off before payout. |
| Equipment — kiln, sewing machine, embroidery machine, Cricut, laser cutter, 3D printer, soldering iron, jewellery bench tools | Yes | Box 49 — Annual Investment Allowance / cash basis expense | Under cash basis (default for sole traders since 6 April 2024) include with other expenses in the year of purchase. Under traditional accounting claim AIA, up to £1,000,000 a year. |
| Small tools and consumables — needles, scissors, paintbrushes, sandpaper, replacement kiln elements, drill bits | Yes | Box 22 — Repairs and maintenance of property and equipment | Items that wear out and get replaced regularly. |
| Studio rent (artist's collective, dedicated shared maker space, garage conversion fitted out as a workshop) | Yes | Box 21 — Rent, rates, power and insurance costs | Dedicated business space rent is fully allowable. Keep the licence or lease. |
| Studio utilities — electric (kiln firings can be material), gas, water | Yes | Box 21 | For a separate studio, full cost. Kiln-heavy potters can see hundreds of pounds in electric. |
| Working from home flat rate (admin, listing, photography, packing) | Yes | Box 21 | £10 / £18 / £26 a month for 25–50 / 51–100 / 101+ hours business use. Full-time home-based makers easily hit the 101+ tier. |
| Public liability + craft / product-liability insurance (NMTF Mart, ICHF Insurance, Direct Line for Business) | Yes | Box 21 | Important if you sell anything that touches skin (candles, soaps, jewellery) or that can break and cause injury. Annual premium fully allowable. |
| Software subscriptions — Canva Pro, Adobe Creative Cloud, Procreate, Etsy Pattern, eRank, Shopify, Printful, channel managers | Yes | Box 23 — Phone, fax, stationery and other office costs | Monthly or annual subscriptions — fully allowable. |
| Photography for listings — lightbox, props, backdrops, ring light, second-hand camera | Yes | Box 23 / Box 49 | Smaller items as office costs. Cameras, lighting kits and lightboxes over a few hundred pounds via Box 49. |
| Refresher and advanced CPD — new glazing courses, advanced silversmithing, polymer-clay masterclasses | Yes | Box 30 | Advanced training inside your existing craft is allowable. Initial courses taken to become a maker (your first pottery weekend, jewellery-making evening course) are not allowable. |
| Trade body subscriptions (Crafts Council, British Craft Trade Fair members, Etsy UK Sellers Association) | Yes | Box 30 | Listed by HMRC as an example of allowable trade subscriptions. |
| Mobile phone bill — business proportion | Partly | Box 23 | 30-60% is typical for a maker running listings, customer messages and social media through the phone. |
| Advertising — Etsy Ads, Meta / Instagram boosts, Pinterest Ads, Google Shopping, leaflets at craft fairs | Yes | Box 24 — Advertising and business entertainment costs | Client entertainment (taking buyers out) is not allowable. |
| Craft fair pitches, market stall fees, festival vendor fees | Yes | Box 30 | Stall fees at events are allowable trade costs. Keep the booking confirmation. |
| Accountant or bookkeeper fee | Yes | Box 28 — Accountancy, legal and other professional fees | Including the cost of preparing your Self Assessment. |
| Initial craft course taken to enter the trade (first pottery course, first jewellery weekend, first calligraphy beginner class) | No | — | Initial qualifying training to enter the profession is treated as preparing to trade, not refresher CPD — not allowable. |
| Materials used to make personal gifts or items for your own home | No | — | Personal use is never allowable. If you make 200 candles and gift 20 to friends and family, you can only claim cost of materials for the 180 sold. |
| Plain trousers, T-shirts, aprons not branded with your trading name | No | — | HMRC: "you cannot claim for everyday clothing (even if you wear it for work)." Branded aprons with your shop name are allowable. |
| Lunch and coffee during the working day | No | — | Subsistence is only allowable on overnight trips away from your normal working area (e.g. a craft fair in another city with a hotel stay). |
| Parking fines, speeding fines, customs penalties | No | — | Fines are never allowable. |
Box numbers from HMRC SA103F Notes 2026. If your turnover is under £90,000 you can use the shorter SA103S — boxes 11–19 map to the same expense categories, with Box 23 for AIA. If your total trading income across all platforms is under £1,000 a year, you can use the Trading Allowance and don't need to declare.
Lucy, a Sheffield ceramics & candle maker on Etsy + Shopify
The setup
Lucy is 34, lives in Sheffield and runs a full-time small-batch business making hand-thrown ceramics and hand-poured candles. She sells mostly through Etsy (about £26,000 of gross sales) and her own Shopify store (about £9,000). She rents a small studio at an artist's collective in Kelham Island for £100 a month, fires her own kiln, and packs orders at home. Gross turnover for 2025-26: £35,000. She's been running for 4 years so the initial courses are long gone — all current CPD is allowable.
What she claims at year end
Tracked through PocketReceipt across the year:
The maths
Gross turnover £35,000 minus £20,405 of expenses leaves a taxable profit of £14,595. After the £12,570 personal allowance, £2,025 falls in the basic-rate band. Income Tax at 20% is £405. Class 4 NICs at 6% on profits between £12,570 and £50,270 add £122. Total tax due: £527.
What it would have cost without the records
If Lucy had only claimed the obvious — materials, postage, the visible Etsy fees, studio rent and accountant fee (~£15,500) — and missed the Etsy Payments processing fees, kiln element, software subscriptions, insurance, Crafts Council membership and Etsy Ads, her taxable profit would be £19,500. Income Tax would be £1,386 and Class 4 NICs £416, total £1,802. The records save her £1,275 a year — most of the gap is Etsy Payments processing fees (netted off her payouts), software, insurance and advertising.
MTD ITSA — Lucy is caught from April 2027, not April 2028
The MTD ITSA threshold uses gross income (turnover before expenses), not profit. Lucy's £35,000 gross puts her over the £30,000 threshold from 6 April 2027 — she's caught a full year earlier than she'd be by profit.
From 6 April 2026 anyone with combined self-employment + property income over £50,000 must file 5 times a year instead of 1: four quarterly cumulative updates (due 7 August, 7 November, 7 February and 7 May) plus a Final Declaration on 31 January. The threshold drops to £30,000 from 6 April 2027 (catching Lucy and most full-time Etsy makers) and £20,000 from 6 April 2028 (catching nearly every active maker). The qualifying-income test uses the previous tax year's Self Assessment. Once in, you can only opt out again after 3 consecutive tax years below the threshold.
Common tax mistakes UK Etsy sellers make
- Reporting only what hit the bank (net of Etsy fees) as turnoverEtsy reports your GROSS sales to HMRC under the Digital Platforms Reporting Rules in force since 1 January 2024. If you only report the net payout, HMRC's data won't reconcile and you've under-stated turnover. The right way: report gross sales as turnover (Box 15), then claim Etsy listing/transaction fees and Etsy Payments processing fees as separate expenses.
- Missing Etsy Payments processing feesThe 6.5% transaction fee is visible. The separate ~4% + £0.20 payment-processing fee is netted off before the payout reaches your bank, so it's easy to forget. On £26,000 of Etsy sales that's £900-£1,100 a year of missed expense relief.
- Forgetting personal-use deductions on materialsIf you make 200 candles and gift 20 to family, you can only claim materials cost for the 180 you sold. The 20 personal-use ones reduce your allowable materials in proportion.
- Treating the initial craft course as CPDYour first pottery weekend, first jewellery-making evening class, first calligraphy course — taken before you started trading — is initial qualifying training, not allowable. Refresher courses and new-technique CPD once you're already trading IS allowable.
- Thinking the £1,000 Trading Allowance applies per platformThe Trading Allowance is £1,000 a year across ALL trading income — Etsy + eBay + Vinted + your own Shopify combined. If you make £600 on Etsy and £600 on Vinted you're over the threshold and must declare.
- Thinking MTD ITSA is about profit, not turnoverThe £50k / £30k / £20k MTD thresholds are tested against GROSS turnover. Many full-time makers have £25k-£40k turnover and £8k-£15k profit. Looking at profit gives a false sense of safety — by gross turnover, most full-time makers are caught from April 2027 or 2028.
- Plain aprons and "studio outfits" claimed as uniformHMRC's rule is explicit: everyday clothing is never allowable. An apron with your shop name embroidered is fine; a plain one isn't.
- Cash sales at craft fairs not recordedMarkets, fairs and pop-ups generate cash. HMRC expects you to record those takings even if no platform reports them. Use a daily takings sheet at every event.
- VAT crossover ignored as turnover approaches £90kThe VAT threshold is £90,000 over any rolling 12-month period — not per tax year. Etsy sellers growing fast can cross it sooner than expected. Once registered, you'll need to add VAT to your prices or absorb 20% from margin.
- Missing the 5 October registration deadlineIf you started selling in the 2025-26 tax year and earned over £1,000 you must register for Self Assessment by 5 October 2026. HMRC can charge a "failure to notify" penalty.
Year-end tax tips for Etsy sellers
- Reconcile Etsy + Shopify + eBay annual statements before filingEach platform issues an annual summary. Pull all platforms, add them, and compare to bank. The gross figure (before fees) is what HMRC has on file from the digital platforms reporting rules — your tax return must match.
- Time equipment purchases before 5 April if you need themA new kiln, sewing machine, laser cutter or Cricut bought before 5 April pulls the deduction into the current tax year (Box 49 under cash basis or AIA under traditional accounting).
- Stock up on materials and packaging before 5 AprilIf you can use the materials within a reasonable period, buying them before 5 April lands the deduction in the current tax year. Don't over-buy just for tax — but a planned restock can be timed.
- Pay annual insurance, Crafts Council membership and software subscriptions before 5 AprilRenewals paid before 5 April land the deduction in the current tax year rather than rolling into next.
- Decide flat-rate vs actual home-office apportionmentFor makers working 101+ hours a month from home (full-time hobby converters), actual-cost apportionment of broadband, heat and light often beats the £26/month flat rate. For part-timers, the £10-£18 flat rate is simpler.
- Check your Class 4 NIC band crossingFor 2025-26 Class 4 NICs are 6% on profits between £12,570 and £50,270, then 2% above. Most makers sit comfortably in the 6% band after expenses.
- If gross turnover is over £30,000, plan for MTD ITSA from 6 April 2027From 6 April 2027 makers with combined self-employment + property income over £30,000 must file four quarterly cumulative updates plus a Final Declaration each year. From 6 April 2028 the £20,000 gross threshold catches almost every active full-time Etsy seller.
FAQ for Etsy sellers
Do I have to declare my Etsy earnings?
Yes if your gross trading income across all platforms exceeds £1,000 in a tax year. Below £1,000 the Trading Allowance covers you and no declaration is needed. From 1 January 2024 Etsy reports gross seller earnings directly to HMRC under the Digital Platforms Reporting Rules — so HMRC already knows what you've sold.
What expenses can I claim as an Etsy seller?
Cost of materials (clay, fabric, wax, beads, paint), Etsy listing and transaction fees, payment processing fees, packaging, postage, equipment (kilns, sewing machines, laser cutters, 3D printers) under cash basis or AIA, studio rent, working-from-home flat rate, photography props, software subscriptions and accountancy fees. The biggest single line is usually the cost of materials (Box 17).
Does Etsy tell HMRC how much I earned?
Yes. Since 1 January 2024 digital platforms must report seller earnings to HMRC under the Digital Platforms Reporting Rules. Etsy, eBay, Vinted, Amazon Handmade, Folksy, Depop and similar all report your GROSS earnings (sale price before fees) each year. Your tax return turnover must match. Report gross sales then claim Etsy fees and payment processing as separate expenses.
Are initial craft courses deductible?
Refresher and advanced courses inside your existing craft (new glazing techniques, advanced silversmithing, new fabric-printing methods) are allowable. The initial qualification or course taken to enter the craft as a business — your first pottery course, first jewellery-making weekend — is treated as preparing to trade and is not allowable.
What does MTD ITSA mean for me as an Etsy seller?
The MTD ITSA threshold uses GROSS income (turnover before expenses), not profit. Many Etsy sellers have £20,000-£40,000 gross turnover but £5,000-£15,000 profit — and wrongly think they're below the threshold. They are not. From 6 April 2026 you're caught with gross income over £50,000; from 6 April 2027 over £30,000; from 6 April 2028 over £20,000. Most full-time Etsy makers will be caught from April 2027 or 2028. In scope means 5 filings a year, not 1: four quarterly cumulative updates (7 August, 7 November, 7 February, 7 May) plus a Final Declaration on 31 January.
When is my tax due?
Self Assessment for the 2025-26 tax year is due online by 31 January 2027. If your tax bill is more than £1,000 you also pay 50% as a first payment on account that day, and another 50% on 31 July 2027. Makers above MTD thresholds also file quarterly cumulative updates from their relevant start date.
HMRC and PocketReceipt references used on this page
- HMRC, Expenses if you're self-employed — overview
- HMRC, Clothing expenses
- HMRC, Training courses — what's allowable
- HMRC, Simplified expenses — working from home (£10 / £18 / £26)
- HMRC, Annual Investment Allowance
- HMRC, Cash basis accounting (default since April 2024)
- HMRC, Self-employed National Insurance rates
- HMRC, Self Assessment deadlines
- HMRC, Register for Self Assessment (5 October following the tax year)
- HMRC, Trading Allowance (£1,000 per year)
- HMRC, Selling goods or services on a digital platform (Etsy, eBay, Vinted, Amazon Handmade reporting rules)
- HMRC, HMRC Tax Help for Hustles — side-business tax campaign
- HMRC, Making Tax Digital for Income Tax
- HMRC, Qualifying income for MTD ITSA (gross income, not profit)
- HMRC, SA103F Notes 2026 — Self-employment (full) (PDF)
- PocketReceipt, VAT threshold calculator · MTD Forecaster · Mileage calculator
- PocketReceipt, Sole-trader allowable expenses — full guide · MTD ITSA quarterly checklist
- PocketReceipt, Receipt scanner apps for sole traders, compared
Worked example figures are illustrative. Tax rates use 2025-26 thresholds: personal allowance £12,570; basic-rate Income Tax 20%; Class 4 NICs 6% on profits between £12,570 and £50,270, 2% above. Etsy fee figures (listing $0.20, transaction 6.5%, payment processing ~4% + £0.20 for UK) reflect typical rates and may change — always check Etsy's current fee schedule. PocketReceipt is a record-keeping app, not a tax adviser — speak to an accountant for advice on your situation.