HMRC ‘nudge’ letters: income from online marketplaces up to 5 April 2023 – what you need to do

Why are HMRC sending these letters?

HMRC are sending letters to people who they think:

• have earned income from online marketplace sales during tax years up to 5 April 2023, and
• have not yet paid tax on this income.

The letter is aimed at online marketplace sellers who HMRC think are carrying out trading activity.

If you have received a letter, it is because HMRC have obtained data showing you have earned income from online marketplace sales in tax years up to and including 2022/23. However, their systems show that, even though they think you have taxable income, you have not registered for self assessment.

HMRC think that you may not have declared all your income and may not have paid all the tax you owe.

Please note, that even if you have earned income from online marketplace sales, you may not have to pay tax on it. See the heading below What if I do not have any income to tell HMRC about?

If you did make sales which you should have declared, HMRC want to encourage you to make a voluntary disclosure for tax years up to and including 2022/23, so that you can declare your income and pay any tax that is due.

  These letters form part of an HMRC one to many (OTM) campaign. An OTM campaign is when HMRC send out a standard message related to a specific topic to multiple taxpayers. HMRC use OTM campaigns for different reasons. This OTM campaign is intended to encourage you to check and correct your tax affairs and make a voluntary disclosure if appropriate.

What should I do if I receive a letter?

Do not ignore the letter.

You should take action as soon as possible, even if you do not think you have any income to declare.

What if I have undeclared income I need to tell HMRC about?

If you have not declared your income to HMRC for tax years up to and including 2022/23, the letter explains what you must do. We provide some further information below.

Online disclosures

To tell HMRC about income for tax years up to and including 2022/23, you need to make a voluntary disclosure. The letter directs you to the Digital Disclosure Service. You can access the Digital Disclosure Service on GOV.UK, as well as HMRC’s guidance on how to make a voluntary disclosure using this service.

You need a Government Gateway user ID and password to use the Digital Disclosure Service. If you do not already have a user ID, you need to create one. You can do this on GOV.UK.

Notify HMRC

The first stage in making a voluntary disclosure is to use the Digital Disclosure Service to notify HMRC that you intend to make a voluntary disclosure.

• You must notify HMRC within 30 days from the date of HMRC’s letter.
• HMRC will write to you to give you your unique disclosure reference number (DRN).
• You must use your DRN whenever you contact HMRC about your disclosure.
• HMRC will also send you a unique payment reference number (PRN), which you must use when you pay HMRC what you owe.

Make the disclosure

The second stage is to make the actual disclosure. You can do this as soon as you have your DRN. You must make your voluntary disclosure within 90 days of HMRC acknowledging your notification.

Pay your tax, interest and penalties

You must make your payment when you submit your disclosure. Your payment must include your self-assessed tax liability, interest and penalties. See the heading Will I have to pay penalties and interest?

If you cannot afford to pay what you owe within the 90 day deadline, you must make a payment arrangement with HMRC. Do this before you submit your disclosure. See What if I cannot pay all the tax I owe? below.

Paper disclosures

If you are not able to use the Digital Disclosure Service, you can make a voluntary disclosure on paper.

Notify HMRC

You should contact HMRC using the telephone number provided in the letter, indicating that you would like to make a voluntary disclosure, but that you cannot use the Digital Disclosure Service. You should request a paper or manual disclosure form. You should do this within 30 days from the date on HMRC’s letter.

HMRC will write to you with your unique disclosure reference number (DRN) and unique payment reference number (PRN). HMRC should list out the information they require from you. They will enclose a number of factsheets to assist you with working out your penalties.

Make the disclosure

You must write to HMRC to make the disclosure. Broadly, you need to provide:

• your personal and contact details,
• your National Insurance number,
• your DRN,
• details of previously undeclared tax liabilities for each tax year up to and including 2022/23,
• calculations showing how you have worked out the interest and the penalties due,
• evidence to support how you have decided your behaviour for the purpose of the penalties.

You must also include a declaration to say that you are making a full disclosure and that you understand that false disclosure could result in a prosecution.

Pay your tax, interest and penalties

You must also make your payment. Your payment must include your self-assessed tax liability, interest and penalties. See the heading Will I have to pay penalties and interest?

If you cannot use one of the online methods, you can pay by cheque. You should make the cheque payable to ‘HM Revenue and Customs only’ and write your PRN on the back of the cheque. You should send your cheque to:

If you cannot afford to pay what you owe within the 90 day deadline, you must make a payment arrangement with HMRC. Do this before you submit your disclosure. See What if I cannot pay all the tax I owe? below.

  Read carefully what the HMRC letter says about sending documents to HMRC. It is not normally necessary to send original documents. So, if you can, send copies. Make sure you retain copies of any documents you send to HMRC.

What if I do not have any income to tell HMRC about?

If you check your tax position and you are confident that you do not have undeclared income to be disclosed, you should contact HMRC to let them know. You must contact HMRC within 30 days from the date of their letter.

You may not have undeclared income to report if:

• You have already told HMRC about all your income – that is, HMRC have made a mistake in thinking that you have not submitted a tax return;
• You have earned income from online marketplace sales, but your total income is covered by the trading allowance;
• Your only online marketplace income is from the sale of personal items, for example, items you no longer need or use.

You can contact HMRC by telephone or by email. Whichever method you choose, you must confirm that you do not need to make a disclosure and explain why. You should also quote the reference number at the top of HMRC’s letter.

The contact details are contained in HMRC’s letter.

What if I ignore the letter?

If you do not contact HMRC within 30 days from the date of the letter, they are likely to open a compliance check into your tax position. Or they may make an assessment. This means they may issue a bill to you setting out what they think you owe based on the information that they have, including tax, interest and penalties.

What happens next?

HMRC will compare the disclosure you make with the data they hold in their various systems and information from their risk analysis work. Their decision – whether they accept your disclosure or not – will be based on this comparison.

If HMRC think that you have provided incorrect information in your disclosure, they may open a compliance check.

Will I have to pay penalties and interest?

HMRC charge penalties for failing to meet certain deadlines. These include penalties for submitting your tax return late, paying your tax late and failing to notify a tax liability on time. You may have to pay a penalty, unless you can show you have a reasonable excuse.

For tax years up to and including 2022/23, you are likely to be liable to failure to notify penalties in line with HMRC’s guidance. You must work out the penalties you have to pay using the Digital Disclosure Service. If you think you have a reasonable excuse and so are not liable to a failure to notify penalty, you must explain why as part of your disclosure.

If you make a disclosure in response to this letter, HMRC will treat the disclosure as prompted.

HMRC charge interest on tax that you pay late.

For tax years up to and including 2022/23, you will have to pay interest on any tax that is due as a result of making the disclosure. You must work out the interest you have to pay using the Digital Disclosure Service.

The Digital Disclosure Service has calculators to help you work out your penalties and interest.

There is guidance on penalties and interest, including reasonable excuse, on our website.

There is guidance on failure to notify penalties on GOV.UK.

What if I cannot pay all the tax I owe?

If you owe tax, but cannot afford to pay it all in one payment, and/or cannot afford to pay it by the relevant deadline, contact HMRC. You can ask HMRC about setting up a Time to Pay arrangement. If HMRC agree to offer you a Time to Pay arrangement, this will spread the payments of tax that you owe over several months.

What about tax years 2023/24 and 2024/25?

This nudge letter relates to tax years up to and including 2022/23 only.

However, if you have income from online marketplace sales in 2023/24 that you need to declare too, then you need to do this by completing a self assessment tax return.

To tell HMRC about your income for the tax year ended 5 April 2024, you must register for self assessment. You must do this first, even though the registration deadline has already passed – it was 5 October 2024.

Once you have registered for self assessment, HMRC will send you your unique taxpayer reference (UTR), which you need to complete and submit your tax return. HMRC will also send you a notice to file, which will tell you the deadline for submitting your self assessment tax return for 2023/24. The normal deadline for an online tax return is 31 January 2025, but because you will have registered late, you will have a later deadline.

You may be liable to failure to notify penalties and / or late payment penalties.

  If you think you owe tax for 2023/24, you must try and estimate this and pay it as soon as possible to help reduce any penalties. You can make a tax payment once you have your UTR and then submit your tax return later.

Where can I find more information and help?

We have an example of the HMRC letter available to view.

If you are unsure of your tax position, you should seek independent advice. If you can afford to pay a professional tax adviser, you can find more information on how to find one on our website.

If you are on a low income and cannot afford to pay for a professional tax adviser, you should contact the tax charity TaxAid, who may be able to assist you.

If your health or personal circumstances mean that you find it difficult to deal with your tax position you may be able to get additional help from HMRC’s Extra Support Team.