If you sell on Etsy, eBay, Vinted, Amazon, Depop or any other online marketplace, Making Tax Digital for Income Tax applies to you in the same way it applies to any sole trader. The rules — digital records, quarterly updates, compatible software — are the same regardless of what you sell.
What is different for online sellers is that your sales data already lives in a digital format. Every platform provides transaction reports you can export. This makes MTD record-keeping easier in some ways than for a tradesperson with paper receipts, but it also means HMRC now receives your platform income data automatically, so accuracy matters more than ever.
This guide focuses on the online-seller-specific challenges. For the generic MTD rules, see our MTD for Income Tax explained guide.
What Is MTD for Online Sellers?
MTD for online sellers is Making Tax Digital for Income Tax applied to marketplace businesses — Etsy, eBay, Vinted, Amazon, and Depop. The rules are the same as for any sole trader: digital records, quarterly updates, compatible software. What makes online sellers different is that your sales data already lives in a digital format (platform transaction reports), which makes record-keeping easier — but HMRC now receives your platform income data automatically, so accuracy matters more than ever.
Does MTD Apply to Online Sellers?
Yes, if your qualifying income is above the MTD eligibility threshold. For online sellers, qualifying income is your gross sales — the total amount customers paid you, before platform fees, before postage you charged, and before stock costs.
| Phase | Start date | Qualifying income threshold |
|---|---|---|
| Phase 1 | 6 April 2026 | Over £50,000 |
| Phase 2 | 6 April 2027 | Over £30,000 |
| Phase 3 | 6 April 2028 | Over £20,000 |
If your gross sales across all platforms exceed £50,000, you must use MTD from April 2026. For the full threshold rules, see our MTD qualifying income thresholds guide.
Is it a trade or just selling old stuff?
MTD only applies if your online selling counts as a trade. HMRC uses “badges of trade” to decide:
- Are you buying items specifically to resell for profit?
- Do you sell regularly and systematically?
- Do you modify or improve items before selling?
- Are you trying to make a profit?
Selling a few of your own old clothes on Vinted at a loss is probably not a trade. Buying wholesale stock to resell on Etsy at a profit is clearly a trade. If you are unsure, see our trading allowance vs expenses guide for the full test.
What Counts as Qualifying Income for Online Sellers
This is the area where online sellers most often get it wrong.
Gross sales, not net payouts
Platforms deduct fees before paying you. Etsy charges listing fees and transaction fees; eBay takes a final value fee; Amazon deducts referral fees and fulfilment fees. The amount that hits your bank account is net of these fees.
For MTD (and for Self Assessment), your income is the gross sale amount — what the customer paid. The platform fees are a separate expense.
Example: a customer buys a handmade necklace for £50 on Etsy. Etsy charges a 6.5% transaction fee (£3.25) and a listing fee (£0.20). Your payout is £46.55.
| Entry | Amount | Category |
|---|---|---|
| Gross sale | £50 | Income |
| Etsy transaction fee | -£3.25 | Expense (platform fees) |
| Etsy listing fee | -£0.20 | Expense (platform fees) |
| Net payout | £46.55 | The result, not the starting figure |
Recording only the £46.55 payout understates both your income and your expenses. If HMRC checks your records against the platform data it now receives automatically, a net-only approach creates an immediate discrepancy.
Refunds
If you issue a refund, it reduces your income. Record the refund as a negative income entry (or a separate refunds category) in the same period it happens. Most accounting software handles this automatically if you import platform reports.
VAT
If you are VAT-registered, your gross sales include VAT. If you are not VAT-registered, your gross sales are the amount the customer paid with no VAT component. For the VAT registration threshold, see our VAT registration for sole traders guide.
HMRC already has your platform data
Under digital platform reporting rules (effective from January 2024), platforms must report sellers’ income to HMRC automatically if you exceed £1,000 in annual sales on that platform, as covered in HMRC’s guidance on ecommerce for online sellers. This means HMRC can cross-reference your MTD quarterly updates against the data it receives directly from Etsy, eBay, Vinted and Amazon. For more on this, see our gig economy tax guide.
Record-Keeping Across Multiple Platforms
The main challenge for online sellers is combining data from multiple platforms into one set of digital records. Each platform provides transaction reports, but they all use different formats.
Platform exports
| Platform | Where to find the export | Format |
|---|---|---|
| Etsy | Shop Manager → Settings → Options → Download CSV | CSV |
| eBay | Seller Hub → Reports → Download | CSV |
| Vinted | Settings → Privacy → Download data | CSV |
| Amazon | Seller Central → Reports → Payments → Transaction view | CSV |
| Depop | Settings → Download my data | CSV |
How to combine them
You have two main options:
- Import each platform’s CSV into your accounting software — most MTD-compatible software can import CSV files and map them to income and expense categories. This is the cleanest approach if you use full accounting software.
- Combine the CSVs into one master spreadsheet — if you use spreadsheet bridging software, combine the platform exports into a single spreadsheet with consistent columns (date, gross sale, platform fees, postage charged, refunds). Your bridging software then submits the totals to HMRC.
The key rule is that the figures in your MTD submission must come from the platform data by formula or direct import, not by retyping. This is HMRC’s digital links rule — see our can I use spreadsheets for MTD guide for the full explanation.
Top Expense Categories for Online Sellers
These are the expense categories that matter most for online selling. Set them up in your software so transactions are categorised consistently.
Platform fees
The biggest expense for most online sellers. This includes:
- Transaction fees (percentage of sale price)
- Listing fees
- Payment processing fees
- Promoted listing / advertising fees charged by the platform
If you import platform reports, these fees are usually itemised and can be mapped to a platform fees category automatically.
Postage and packaging
What you pay to Royal Mail, couriers or fulfilment services to ship orders. This is separate from any postage charge you pass on to the customer — the customer charge is income, and what you pay the courier is the expense.
Packaging materials (boxes, mailers, tape, bubble wrap, labels) are also allowable.
Stock and purchases for resale
The cost of items you buy to resell is your biggest expense if you are a reseller rather than a maker. This includes:
- Wholesale stock
- Individual items bought for resale (e.g. from charity shops, car boot sales, wholesale markets)
- Raw materials if you make what you sell (for Etsy makers)
Keep receipts or invoices for all stock purchases. If you buy from a wholesaler, the invoice is your record. If you buy from a charity shop, keep the till receipt.
Returns costs
If a customer returns an item and you pay the return postage, that is an allowable expense. Refunded amounts reduce your income (see above).
Storage costs
If you rent storage space for your stock (a self-storage unit, a garage you rent specifically for business), that is an allowable expense. If you use a room in your home for stock, see use of home as office below.
Home office
If you do your listing, packing and admin from home, you can claim a portion of your home costs. The simplified rate is £6 per week. Alternatively, claim a proportion of actual bills based on the space used. See our trading allowance vs expenses guide for how this works.
Phone and internet
If you use your phone and internet for your online business (messaging buyers, photographing products, managing listings), claim the business portion. If you have a separate business phone or SIM, claim the full cost.
Equipment for product photography
Camera, lighting, backdrops — these are allowable if used for your business. Expensive items (a professional camera) may be capital assets rather than expenses. See our trading allowance vs expenses guide for the capital vs expense distinction.
Software That Fits Online Sellers
Online sellers have an advantage over tradespeople: your sales data is already digital. This means spreadsheet bridging software is a realistic option, not a compromise.
Spreadsheet bridging (good fit for online sellers)
If your records are relatively simple — platform sales, platform fees, postage, stock purchases — a spreadsheet plus bridging software can work well:
- 123 Sheets — from around £20/year, bridges spreadsheets to HMRC
- VitalTax — around £30/year
- Acxite — free for single users
You export your platform reports, combine them in a spreadsheet with your expense records, and the bridging software submits the totals to HMRC. The key is maintaining digital links — no retyping. See our can I use spreadsheets for MTD guide for the rules.
Full accounting software (better for growing sellers)
If you want bank feeds, inventory tracking and automatic categorisation, full accounting software is the better choice:
- FreeAgent — free with certain business bank accounts, good for sole traders
- QuickBooks — good inventory features if you hold stock
- Xero — strong on reporting and multi-platform reconciliation
- Coconut — simple, designed for sole traders
For the full cost comparison, see our cheapest MTD software for sole traders guide.
Worked Example: One Quarter for an Etsy Seller
Here is how a typical quarter looks for a sole trader selling handmade items on Etsy in Q1 (6 April to 5 July 2026).
Income
| Source | Amount |
|---|---|
| Gross Etsy sales (120 orders) | £8,200 |
| Postage charged to customers | £480 |
| Refunds issued (2 orders) | -£85 |
Total income for the quarter: £8,595
Expenses
| Category | Amount |
|---|---|
| Etsy transaction fees (6.5%) | £533 |
| Etsy listing fees (120 listings) | £24 |
| Etsy offsite ads fees | £82 |
| Postage paid to Royal Mail | £410 |
| Packaging (boxes, mailers, tape, labels) | £95 |
| Raw materials (beads, wire, findings) | £3,500 |
| Home office (simplified rate, £6/week × 13 weeks) | £78 |
| Phone and internet (business portion) | £26 |
Total expenses for the quarter: £4,748
What goes into the quarterly update
Your software (or spreadsheet bridging tool) totals these digital records and sends a summary to HMRC by 7 August 2026. The summary shows approximately £8,595 income and £4,748 expenses. No tax is due at this point — the quarterly update is informational.
Note that the £480 postage charged to customers is income, and the £410 postage paid to Royal Mail is an expense. They are recorded separately, not netted off.
Selling on Multiple Platforms
If you sell on Etsy, eBay and Vinted simultaneously, this is usually one trade — online retail. You send one quarterly update covering all platforms, not three separate ones. The income and expenses from all platforms are combined in your digital records.
If you also have a completely separate trade (e.g. you are a plumber who sells tools online as a side line), that may be two trades, requiring separate quarterly updates. See our MTD with multiple trades guide for the rules.
The Bottom Line
MTD for online sellers is, in some ways, easier than for other professions because your sales data is already digital. The main tasks are:
- Record gross sales, not net payouts — platform fees are a separate expense
- Import platform reports into your software or spreadsheet regularly
- Keep receipts for stock and packaging — photograph or scan them
- Choose software that fits — spreadsheet bridging works well for simple online businesses; full accounting software if you want inventory tracking and bank feeds
- Submit quarterly updates by 7 August, 7 November, 7 February and 7 May
Remember that HMRC now receives your platform income data directly. Accurate digital records are not just about MTD compliance — they are about matching what HMRC already knows.
For the complete MTD overview, see our Making Tax Digital guide. For threshold details, see MTD qualifying income thresholds. For spreadsheet bridging rules, see can I use spreadsheets for MTD. For the full profession hub, see MTD by profession.