Do I need to create a limited company in the UK to sell on Etsy?

Etsy has become a global powerhouse for creative entrepreneurs, with over 95 million active buyers and 4.4 million sellers worldwide, offering a unique platform for handmade, vintage, and craft goods. For UK residents, Etsy is a golden opportunity to turn a hobby into a thriving business. But as your shop grows, questions arise: Do you need a formal business structure? Should you register as a sole trader or a limited company? How do taxes, VAT, and product compliance work? This comprehensive guide answers all these questions, ensuring you have everything you need to launch and scale your Etsy shop successfully. Plus, discover how FormationsHunt limited company registration can simplify your journey, making your Etsy dream a reality with ease and professionalism.

Why Etsy UK is Your Next Big Opportunity

The UK’s creative market is booming, with Etsy reporting an 11.07% revenue increase to $2.47 billion in 2022, driven by independent sellers like you. Whether you’re crafting jewellery, designing printables, or selling vintage finds, Etsy UK connects you to a global audience hungry for unique products. But success requires more than great products—it demands a solid business foundation. From tax compliance to building buyer trust, setting up your shop correctly is key. Let’s dive into the essentials, starting with a critical question: Do you need to register a business to sell on Etsy?

Step-by-Step: From Registering Your Company to Launching Your Etsy Shop in the UK

If you're planning to sell on Etsy UK, the smartest first move is to officially register a UK limited company—especially if you're a serious seller, a non-UK resident, or planning to scale your online brand.

Start with Your Limited Company Registration (with FormationsHunt)

Before anything else, you'll need to form a UK private limited company (LTD), which is the standard legal structure for small e-commerce sellers. With FormationsHunt, the process is 100% online, quick, and beginner-friendly — no paperwork nightmares, no legal confusion. You can do it with 4 simple steps.

You simply:

1. Search Your Company Name – Use our website’s free search tool to instantly check if your desired company name is available and compliant with Companies House rules.
    
2. Select Your Desired Package – Two Tailored Packages for Etsy Sellers, pick the option that suits you best:
   1. Non-Resident Package – Perfect for sellers living outside the UK who want a full setup (includes UK Registered office address service, business mail forwarding address, VAT registration, and more). 
   2. E-Seller Package – Ideal for local Etsy entrepreneurs or online marketplace sellers looking to register a company and get started fast with minimal setup hassle.
       
3. Select Your SIC Code (Business Activity) – Before entering any other details, you’ll choose your official SIC code, which defines your business activity. Our smart system allows you to choose the most relevant codes for your e-commerce or service-based business, ensuring you meet UK registration requirements. Typically 47910 for "Retail sale via mail order houses or via Internet." Don't worry if you're unsure; our customer care executives will personally guide you with suggestions and explanations, ensuring everything complies with Companies House requirements.
    
4. Provide Company & Officer Details – After the SIC code, our guided online form will walk you through:

• Registered Office Address (included in many packages)
• Business Mail Forwarding Address (included in many packages)
• Director’s Service Address (to protect your home address, included in some packages)
• Director and Shareholder Information (names, dates of birth, nationalities, and residential addresses)
• Share Structure & Allocation (decide how ownership is divided)
• Optional extras such as VAT registration, domain name setup, and trademark support
• Next, you move to the Banking & Software page (optional — not mandatory). This page appears after the company/officer details. It helps customers pick banking partners and recommended business software, but is not required to complete the formation.
  
  What the Banking & Software page contains:
  • A list of banking partners we work with (name and short description).
  • Basic contact information and support hours for each banking partner (customers use these to schedule or call for account opening).

Submit & Let Us Handle the Rest

Once you’ve confirmed your details, our team files your application directly with Companies House. Your company is usually formed within 3–6 working hours(based on the Companies House workload), and you’ll receive:

• Incorporation Certificate
• Memorandum and Articles of Association
• Share Certificate for each shareholder
• Authentication code document
• HMRC UTR Number
• Any additional services or registrations you selected — all delivered securely via email (and printed copies if included in your package).

Banking — The Backbone of Your UK Business Setup

A successful business setup in the UK isn’t just about registering your company — banking is equally important. Having a dedicated UK business bank account ensures:

• Your Etsy (or other marketplace) payments are received directly in GBP
• Your business and personal finances remain separate
• Cash flow management becomes far easier and more transparent

How FormationsHunt Helps You Get Started

At FormationsHunt, we don’t just register your company and leave you to figure out the rest. We guide you through opening your UK business bank account with trusted partners like WorldFirst or Wise. 

This setup offers clear benefits:

• Avoid unnecessary currency conversion fees by receiving funds in GBP
• Position yourself as a legitimate UK-based seller, boosting buyer trust
• Simplify accounting by keeping transactions in one dedicated account
• Meet Etsy’s payment requirements from day one

More Than Just Banking

Our service goes beyond account setup — we handle your essential company filings, provide digital company documents, and offer director service address for directors. All you need to bring is your business idea and an internet connection — we take care of the rest. No matter where you're based, we’ve got a solution tailored to your Etsy journey.

Now, Launching Your Etsy Shop (Post-Formation)

Once your company is officially formed, you're ready to create your Etsy shop and start selling your crafts, prints, vintage finds, or digital products.

Here’s how to go about it:

1. Create an Etsy Seller Account

Visit etsy.com/sell and click “Open Your Etsy Shop.” Use your business name or brand name created during company registration.

2. Set Your Shop Preferences

Choose:

• Shop language
• Country (UK)
• Currency (GBP)

3. Name Your Shop

Use the same or a similar name to your registered company name for brand consistency (but Etsy allows flexibility).

4. Add Listings

Upload your products with high-quality images, detailed descriptions, and tags.

5. Choose How You’ll Get Paid

You’ll need your UK business bank account (we help with this, too — through partners like WorldFirst or Wise), so Etsy can deposit your sales earnings.

6. Set Up Billing

Add a payment method for listing fees and any ad spend. Etsy charges a small listing fee and takes a percentage of each sale.

Pro Tip:

With your UK limited company in place and your Etsy shop launched, you’ll look far more trustworthy to buyers, suppliers, and even ad platforms like Meta and Google.
FormationsHunt isn’t just about company setup — we’re here to make your entire business journey smoother, from day one.
 

Can You Sell on Etsy without registering a Business in the UK?

Yes, you can start selling on Etsy as an individual without a formal business structure, especially if you’re testing the waters or treating it as a hobby. However, HMRC (His Majesty’s Revenue and Customs) has clear guidelines that determine when your Etsy shop becomes a taxable business:

• Trading Allowance: You can earn up to £1,000 per tax year (6 April to 5 April) from self-employment, including Etsy sales, without registering as a business or paying tax. This is ideal for small-scale or hobby sellers.
• When It Becomes a Business: If your Etsy sales exceed £1,000 annually or show signs of regular, profit-driven activity (per HMRC’s “badges of trade”), you must register with HMRC as self-employed. This applies whether you’re a sole trader or considering a limited company.
• Tax Implications: Once your income exceeds the £12,570 personal allowance, you’ll pay income tax (20% basic rate for earnings between £12,571–£50,270) and Class 4 National Insurance (6% from April 2024). If sales exceed £90,000 annually, VAT registration is mandatory.

FormationsHunt Tip: Unsure if you’ve crossed the £1,000 threshold? Our expert accountants can review your Etsy earnings and guide you on HMRC registration, ensuring compliance without the stress. Explore our accountancy services, starting from £65 per month, where we file your accounts, including corporation tax filing, quarterly VAT returns, and PAYE filings.
 

Why a Limited by Shares Company is Ideal for Your Etsy Shop

Choosing a Limited by Shares company as your business structure is a game-changer for your Etsy shop’s success. Here’s why it’s the best choice for serious sellers:

• Liability Protection: Your personal assets (home, savings) are safeguarded, as the company is a separate legal entity, protecting you from business debts or legal claims—crucial for Etsy sellers handling customer orders or international shipping risks.
• Tax Efficiency: Pay corporation tax (19–25% on profits, 2025 rates), often lower than personal income tax, with flexible dividend payments to optimize your income. This can save thousands annually compared to other structures.
• Professional Credibility: A limited company enhances trust with global buyers, especially in Europe, who research your shop’s legitimacy. A professional business name (e.g., “NoraCrafts Ltd”) signals reliability, boosting sales.
• Scalability: Easily open business bank accounts, hire employees, or expand to platforms like Amazon or Shopify. A limited company supports growth without the restrictions of informal setups.
• Global Appeal: For non-residents, a UK limited company simplifies currency management (e.g., GBP via Etsy Payments) and tax compliance, making your shop competitive worldwide.

FormationsHunt Advantage: Our Limited Company Formation Package streamlines the process, handling everything from name checks to Companies House registration. Our E-Seller Package is crafted for Etsy entrepreneurs, streamlining limited company formation with name checks, Companies House registration, and e-commerce accounting tools via Xero and FreeAgent. For non-residents, our Non-Resident Package is a game-changer, offering a UK registered address, director’s address, VAT registration, global document delivery, and tailored support to make your Etsy shop shine worldwide.
 

Licenses, VAT, and Product Compliance

Running a compliant Etsy shop means understanding UK regulations:

• VAT Registration: Mandatory if your annual sales exceed £85,000 (as of 2025). Voluntary registration below this threshold can reclaim VAT on business expenses. Etsy sellers must collect 20% VAT from customers and remit it to HMRC.
• Product Safety: Comply with UK safety standards (e.g., CE marking for toys, electrical safety for gadgets). Research Etsy’s prohibited items list (e.g., flammable goods) to avoid penalties.
• Trademarks: Optional but recommended to protect your brand name or logo. Check for conflicts via the UK Intellectual Property Office.
• Business Insurance: Public liability insurance protects against claims if your products cause harm. Check your home lease for restrictions on running a business.

FormationsHunt Solution: Our E-Seller Package includes VAT registration and compliance guidance, while our Non-Resident Package adds trademark support. For ongoing compliance, we offer full tax accounting services through our in-house team. Choose our All-Inclusive Accountancy Service (£65/month) covering Corporation Tax filing, confirmation statement, quarterly VAT returns, and PAYE submissions — add it during checkout or anytime via your Online Company Manager dashboard. Alternatively, opt for Only Corporation Tax Filing (£450/year) if you just need annual filing support, or Only VAT Filing (£29/month) for VAT-specific needs.
 

Why Non-UK Residents Benefit from Having a UK Company for Their Etsy Shop

Non-UK residents can sell on Etsy UK without a UK company, but forming one offers significant advantages:

• Buyer Confidence: A UK limited company reassures customers, especially in Europe, enhancing trust and sales.
• Currency Management: A UK business account (e.g., Wise) simplifies GBP transactions, avoiding high conversion fees.
• Tax Clarity: A UK company streamlines VAT and tax reporting, reducing compliance risks.
• FormationsHunt Non-Resident Package: Includes everything from company formation to VAT registration and a UK-registered address, making it easy to operate as a global seller.
   

Etsy Fees and Tax Reporting

Etsy charges several fees that impact your pricing strategy:

• Listing Fee: $0.20 per item.
• Transaction Fee: 6.5% of the sale price (including shipping).
• Payment Processing Fee: Varies by location (e.g., 4% + £0.20 in the UK).
• Advertising Fees: Optional, based on your budget.

Tax Reporting:

• Income Tax: Report Etsy profits on your Self Assessment (sole trader) or corporation tax return (limited company). Deduct allowable expenses (e.g., materials, Etsy fees).
• HMRC Side Hustle Rules: Since January 2024, Etsy reports seller data (tax ID, bank details, transactions) to HMRC to combat tax evasion. Ensure accurate records to avoid penalties.
• FormationsHunt Accounting Tools: Our integration with Xero and Link My Books automates income, expense, and VAT tracking, making tax season stress-free.
   

FAQs: Your Etsy and Business Questions Answered

1. Do I need to pay the tax as an Etsy seller?
   
   Yes. If you earn more than £1,000 a year from Etsy, you need to tell HMRC. If you’re self-employed, you’ll pay income tax on profits over £12,570. Selling through a limited company means you’ll pay corporation tax instead. If you earn under £1,000, you can use the trading allowance and won’t need to register.
    
2. Can I use my home address as my company address?
   
   Yes, but check your lease for commercial restrictions. FormationsHunt’s registered address service provides a professional UK address for privacy and compliance.
    
3. Should I register before testing the market?
   
   Test with sales under £1,000. If you plan to scale, register early to build credibility and simplify taxes.
    
4. Can I change my business from a sole trader to a limited company?
   
   Yes, FormationsHunt can handle the transition, transferring your Etsy shop to a new company structure seamlessly.

Conclusion: Turn Your Etsy Dream into a Thriving Business with FormationsHunt

Starting an Etsy shop in the UK is your chance to turn creativity into profit, but success hinges on a strong business foundation. A limited company offers credibility, liability protection, and scalability, making it the choice for serious sellers. With FormationsHunt, you skip the hassle of company formation, VAT registration, and accounting. Our tailored packages—whether for UK residents or non-residents—handle everything from name checks to business banking, letting you focus on crafting and selling. Don’t let paperwork hold back your Etsy empire. Start your journey with FormationsHunt today and launch your shop in as little as 24 hours!

Ready to make your Etsy shop a success? Visit our site for fast, affordable company formation, VAT registration, and accounting support. Your creative business deserves the best—let us help you shine!