If you have received an HMRC letter about undeclared Amazon sales, do not ignore it. HMRC now receives information directly from Amazon and other online marketplaces under digital platform reporting rules. The letter does not automatically mean you owe tax, but you should review your sales history and take advice if income has not been declared.
Over the last few years, HMRC has increased its focus on online sellers, side hustles and ecommerce businesses.
Amazon, eBay, Etsy, Shopify, TikTok Shop and other online marketplaces now share certain seller information with tax authorities under international reporting rules.
HMRC uses this information to:
Many sellers receive what is known as an HMRC nudge letter. These letters are intended to encourage taxpayers to review their position and correct any errors before HMRC takes further action.
Official HMRC Guidance
Check if you need to tell HMRC about your income from online platforms →Under digital platform reporting rules, Amazon may provide HMRC with specific seller information. Here is a breakdown:
| Information Shared | Examples |
|---|---|
| Seller Name | Individual or business name |
| Address | Registered address |
| Date of Birth | For individual sellers |
| Tax Identification Details | UTR, NI Number or VAT details where available |
| Marketplace Earnings | Gross sales figures |
| Number of Transactions | Total annual sales transactions |
| Account Details | Seller account information |
HMRC can use this information to compare reported sales against tax returns already submitted.
Official HMRC Guidance
Selling goods or services on a digital platform →No.
Receiving an HMRC online seller letter does not automatically mean you owe tax or have done anything wrong.
Common reasons for receiving a letter include:
Many people sell unwanted household goods, clothes, electronics or furniture online. If you sold personal belongings at a loss, there may be no tax to pay.
HMRC may have received information from Amazon that matches income you have already reported on your Self Assessment tax return.
The UK Trading Allowance allows many individuals to earn up to £1,000 per tax year from trading activities before tax reporting obligations may arise.
If you were operating an Amazon business and have not declared profits, action may be required. Seek professional advice promptly.
HMRC is primarily interested in identifying:
Yes.
HMRC receives information from online marketplaces and uses sophisticated data matching systems.
Amazon sellers should assume that HMRC may have access to:
This does not mean every seller will be investigated, but it does mean accurate record keeping is essential.
In many cases, yes. Whether you sell through Amazon Marketplace, Amazon FBA, Amazon FBM, private label businesses or wholesale accounts, you may need to declare your profits if you are trading.
Sole traders normally report profits through Self Assessment tax returns each year.
Self Assessment ServicesIf you operate through a company, profits are generally reported through Corporation Tax returns.
Limited Company AccountantsSome small-scale activities may fall within the Trading Allowance. Once activity becomes organised and profit-seeking, further obligations may arise.
Follow this step-by-step guide to handle your HMRC letter correctly.
Ignoring HMRC correspondence rarely makes matters better. Acknowledge the letter and start gathering information. HMRC is generally more lenient with taxpayers who engage voluntarily.
Download the following from Amazon Seller Central:
Remember: HMRC taxes profits, not turnover. Many sellers mistakenly focus only on sales. Allowable expenses may include Amazon fees, FBA fees, advertising, software, packaging, postage and accountancy fees.
Check whether income has already been reported on a Self Assessment tax return or through another means. If it has, your response to HMRC may simply be to confirm this.
Where income has not been declared, voluntary disclosure may help reduce penalties. HMRC treats taxpayers who come forward voluntarily more favourably than those it discovers through investigation.
An experienced Amazon seller accountant can help determine the best course of action, calculate your true tax liability and communicate with HMRC on your behalf.
James starts selling electronics on Amazon as a side hustle.
Over three years he generates:
He never registers for Self Assessment because he assumes Amazon will handle the tax.
In 2026 he receives an HMRC nudge letter. The correct approach is: gather records, calculate profits, review tax obligations, consider disclosure if necessary, and seek professional advice.
Sarah sells old clothes, books and household items on Amazon and eBay.
She receives an HMRC online marketplace letter.
After reviewing her records, she confirms:
In many situations like this, no tax may be due. This is why you should not panic when receiving a letter — review your circumstances carefully.
Ignoring HMRC correspondence can lead to escalating consequences. HMRC generally prefers taxpayers to engage voluntarily, and early action often leads to better outcomes.
HMRC will typically send follow-up correspondence if no response is received.
HMRC can open a formal enquiry into your tax affairs under its statutory powers.
HMRC can issue discovery assessments going back several years for undeclared income.
Late payment interest and financial penalties may be applied. Penalties can be significantly higher if HMRC discovers the underpayment rather than the taxpayer coming forward voluntarily.
If you have received an HMRC Amazon seller letter, a specialist accountant can make the process significantly less stressful and help achieve a better outcome.
Most trading income is taxable whether or not you receive a formal document from Amazon.
This almost always leads to worse outcomes. Engage early.
Failing to register when required can lead to penalties.
You are taxed on profits, not total sales. Claim all allowable expenses.
Amazon fees, advertising, packaging and mileage may all be deductible.
Late filing penalties apply automatically. Stay on top of deadlines.
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Expert help with all HMRC correspondence
If you've received an HMRC letter and are unsure what to do next, Taxwise Accountancy can help. We regularly assist Amazon sellers, eBay sellers and online businesses with HMRC correspondence, tax returns and compliance.
HMRC Nudge Letters
Self Assessment Tax Returns
Voluntary Disclosures
Amazon Bookkeeping
VAT Compliance
Tax Investigations
Whether you are a side hustle seller, Amazon FBA business or established ecommerce company, we can help you understand your obligations and deal with HMRC correctly.