What counts as business income? A plain-English guide

One of the most common questions people ask when they start making money on the side is:

“Does this actually count as business income?”

And honestly, it’s a fair question because it doesn’t always feel obvious.

You might sell a few things on Vinted.
You might get a referral bonus from your bank.
You might do the odd freelance job.
You might receive a gifted product for posting online.
You might make a bit of money from something that still feels like a hobby.

So where is the line?

As usual with tax, the answer is not always a neat little ‘yes’ or ‘no’. Annoying, but very on-brand for HMRC!

The main question is whether you are simply receiving money casually, or whether you are carrying out an activity with the intention of making profit.

HMRC looks at the facts of what is happening. Not just what you call it.

Selling your own stuff is usually different

Let’s start with the big one: selling personal items.

If you sell your own clothes, old furniture, books, baby items, games or random things from around the house, that is usually not business income.

For example:

You bought a coat for £80, wore it for a year, then sold it on Vinted for £25.

That is normally just selling your own belongings. You are not running a business. You are just having a clear-out with a small financial reward at the end.

Lovely stuff. But compare that with this:

You buy ten coats from a charity shop because you think you can resell them online for profit.

That starts to look much more like trading.

The difference is the intention. Were you just selling your own things, or were you buying, making or sourcing items to sell on?

That is the bit that matters.

What about the “online sales tax”?

You might have heard people talk about an “online sales tax” for platforms like Vinted, eBay, Etsy, Depop or Facebook Marketplace.

Let’s clear this up:

There is not a new online sales tax.

What has changed is that digital platforms now have to share certain seller information with HMRC.

So if you sell through online platforms, HMRC may receive details of your sales activity.

This is about reporting and visibility, not a brand-new tax.

This is where a lot of panic comes from. People hear “Vinted is reporting to HMRC” and think:

“Does this mean I’m getting taxed for clearing out my wardrobe?”

Usually, no.

If you are just selling your own unwanted personal items from time to time, there is usually no tax to pay.

But if you are buying items to resell, making products to sell, or using platforms regularly with the intention of making profit, that is different.

So the real question is not:

“Did Vinted or eBay report me?”

The better question is:

“Was I trading?”

A platform report does not automatically mean you owe tax. But it does mean HMRC may have more information than before, so keeping good records matters even more.

Business income usually means you are trading

Business income can include money from things like:

Selling products you bought to resell
Selling products you made
Freelance work
Consulting
Coaching
Digital products
Online content income
Affiliate income
Regular referral income
Workshops or events
Services provided through platforms or marketplaces

You do not need a company, a logo, a website or a business bank account for income to count as business income.

The tax rules can apply before you feel like a “proper business owner”.

Rude? Yes. Important? Also yes.

HMRC uses a set of indicators often called the “badges of trade” to help decide whether something looks like trading. These include things like profit-seeking intention, frequency of transactions, how the item was acquired, and whether the activity is organised in a business-like way.

No single factor decides it by itself. HMRC looks at the bigger picture.

The £1,000 trading allowance trap

There is a £1,000 trading allowance, but this is where people often get caught out.

The £1,000 is based on your income before expenses, not your profit.

So if you made £1,200 of sales and spent £900 on stock, you do not simply say:

“Well, I only made £300 profit, so I’m under £1,000.”

That is not how it works.

The number to watch first is your gross income: which is the amount you receive from sales before taking off expenses.

If your trading income is under £1,000, the trading allowance may mean you do not need to tell HMRC about it.

If your trading income is over £1,000, you need to check whether you need to register for Self Assessment and file a tax return.

What about referral bonuses?

Referral income is a really common grey area.

For example:

A bank pays you £50 when a friend signs up
An investment app gives you free shares
A platform gives you credit or cash for referring users
You share a link and receive a reward when someone joins

A one-off personal referral bonus may not feel like business income.

But if you are regularly promoting referral links, posting them online, encouraging people to sign up, tracking results and receiving money or rewards from it, that starts to look much more like taxable income.

A simple way to think about it:

The more regular, deliberate and profit-seeking it becomes, the harder it is to treat it as just a casual perk.

What about free products and gifted items?

This is especially relevant for creators, influencers and people building an audience.

If a brand sends you something with no expectation attached, that may be different from a clear exchange.

But if you receive a product, service, trip, voucher or payment in return for creating content, posting a review, promoting a brand or providing exposure, there may be tax implications.

It does not always need to be cash to matter.

Sometimes you are being paid in value, not money.

Hobby or business?

This is where A LOT of people get stuck.

You might still think of it as a hobby. But if money is coming in, HMRC may look at what is actually happening.

Signs your hobby might be becoming a business include:

You are trying to make a profit
You have repeat customers
You promote what you sell
You buy stock or materials
You take bookings or orders
You have a page, shop or website
You track sales
You reinvest money into the activity
You do it regularly rather than as a one-off

A hobby can turn into a business gradually.

There is not always a dramatic moment where lightning strikes and a Companies House certificate falls from the sky.

Sometimes it is just: “One little order became ten little orders and now I have a spreadsheet.”

What should you track?

If you are unsure whether something counts as business income, the best thing you can do is keep records anyway.

Track things like:

Sales
Dates
Platform fees
Refunds
Stock costs
Materials
Postage
Mileage
Software
Subscriptions
Receipts
Invoices
Screenshots of platform reports
Bank transfers

Good records give you options.

Bad records give you January panic, mysterious bank transactions and a deep sense of regret.

So, does it count?

Here is the simple version.

Selling your own personal items? Usually not business income.

Buying or making things to sell for profit? Much more likely to be business income.

Doing paid work for someone? Usually business income.

Regularly earning from referrals, affiliates, content or platforms? Very possibly business income.

Receiving something in exchange for promotion or work? Worth looking at properly.

Making under £1,000 before expenses? The trading allowance may cover it.

Making over £1,000 before expenses? You need to check whether you need to tell HMRC.

Final thought

You do not need to panic every time money lands in your account.

But you also do not want to ignore income just because it feels small, casual or “not businessy enough”.

The safest approach is simple:

Keep records.
Understand what type of income it is.
Check the rules before the deadline sneaks up on you.

And if you are not sure where your side hustle sits, that is exactly the kind of thing we help with inside Hustle Mate.

Plain-English guidance and practical resources to keep you in control of your finances.