Paypal isn't a source of income; it's simply a way of transferring funds.
If the money arriving in your Paypal account has come from a kindly uncle sending you a monetary gift for Christmas, it's not taxable. (It's just the same as if he sent you a postal order or cash through the post).
If the money in your Paypal account is derived from eBay sales where you've simply disposed of your personal property (e.g. that hideous sweater that your granny gave you for your birthday), again it's not taxable. (It's the same as advertising a 'Noel Edmonds type sweater' on your local supermarket's customer advertising board).
However if the money in your Paypal account is derived from selling items on eBay which you've purchased for re-sale (e.g. from charity shops, from local auction rooms or from 'bankrupt stock' dealers), then it's classed as running a business as a self-employed trader. The law requires you to register that business with HMRC within two months of starting it. (There's an automatic financial penalty if you don't). Then, if you've already used up you tax-free personal allowance with your regular employment, you have to pay income tax (at 20% unless your total income takes you into a higher tax bracket) on every penny of your PROFIT (not on your INCOME).
HMRC employs hundreds (or possibly thousands) of staff to scour 'Free Ads' pages and auction sites like eBay looking for people who're operating as traders but not declaring their income for taxation.
Chris