Making Tax Digital for Income Tax: What Online Sellers Actually Need to Do

Making Tax Digital for Income Tax (MTD ITSA) is not a new tax. It changes how sole-trader sellers keep records and report income. For most sellers the practical question is the same: does it apply to me, and if so, what do I actually need to change? This page answers the seller-specific version of that question. For the generic mechanics (how quarterly updates work, which software qualifies, how to sign up) see the full MTD ITSA guide on Holloway Davies.

The short answer: does MTD ITSA apply to you?

If you are a sole-trader seller whose combined self-employment and property income exceeds £50,000 in a tax year, you are in scope from 6 April 2026. That means digital record-keeping and quarterly updates to HMRC are mandatory, not optional.

Two points that catch sellers out. First, the test is combined self-employment and property income, not trading profit. If you sell on eBay and also receive rental income, both streams count toward the £50,000 figure before any deductions. Second, this applies to unincorporated sole traders only. If your business is a limited company, MTD ITSA does not apply to it (corporation tax has its own separate roadmap).

The threshold timeline

The rules are phased in by income band. The table below shows when each threshold takes effect, as confirmed by HMRC:

A seller earning £35,000 from combined marketplace activity and rental income is not in scope until April 2027. One earning £55,000 should already have digital records in place now. The phased roll-out is not an indefinite deferral: the £20,000 threshold that arrives in 2028 will bring most established sole-trader sellers into scope.

How the threshold is measured for a multi-platform seller

This is where the seller-specific correction matters. The £50,000 threshold applies to your total combined self-employment income across every platform you sell on, plus any property income. It is not measured per platform.

A worked example shows why this matters:

Each platform individually sits below £30,000, yet the combined total puts this seller above the April 2026 threshold. A seller who watches each platform in isolation and concludes "none of these trigger the threshold" will reach the wrong answer.

Property income is added to the self-employment total before comparing against the threshold. A seller with £40,000 in marketplace income and £12,000 in rental income has £52,000 of qualifying income and is in scope from April 2026.

What is genuinely different for a seller

Generic MTD ITSA content focuses on quarterly updates and compatible software. For a marketplace seller the harder problem is upstream: the underlying records. MTD requires a digital record of every transaction. For a multi-platform seller this means extracting, reconciling and storing data from each platform's settlement reports, not relying on bank deposits alone.

Platform payouts are net figures. Amazon, eBay and Shopify deduct fees, refunds and advertising costs before they transfer money to your bank account. A record that reads "£4,230 received from Amazon" is not a digital transaction record: it is one aggregated net line. MTD-compliant records need the underlying sales, returns, fees and adjustments that make up that figure.

This is the practical uplift MTD imposes on sellers that generic sole-trader guidance does not address. The settlement report is the starting point, not the bank statement. See settlement payout reconciliation for how to structure this work, and cash vs accruals for stock-based sellers for the basis choice that affects how you record inventory movements.

The platform reporting overlap

If you sell on Amazon, eBay, Etsy, Vinted or similar platforms, HMRC already receives income data about your account. The platform reporting rules came into force on 1 January 2024, and first reports were due to HMRC in January 2025. The platform reports its data; you keep and report yours.

These are two distinct obligations that cover similar ground. Platform reporting is the platform's submission to HMRC. MTD ITSA is your submission to HMRC, built from your own digital records. HMRC can compare the two. A seller whose MTD quarterly updates do not reconcile with what the platform reported is exposed to enquiry.

There is a practical upside to this overlap. If you are already pulling and reconciling your platform settlement reports to stay on top of the platform reporting rules, you are most of the way to having MTD-ready digital records. The same underlying data feeds both obligations. For the full picture on platform reporting, see how platform reporting works.

Getting seller records MTD-ready

The checklist for a multi-platform sole trader moving to MTD-ready records:

• Download settlement reports from every platform at least quarterly. Amazon, eBay, Etsy and Shopify all provide downloadable transaction-level reports. These are your source records, not the bank deposit.
• Reconcile settlement reports to payouts so the net figure transferred to your bank ties back to individual sales, returns, fees and adjustments. Unexplained differences will create problems at quarterly update time.
• Record income at the point of sale, not receipt. MTD-compliant software uses the transaction date, not the bank date. For a seller with stock, this also affects how cost of goods sold is matched to sales periods.
• Keep a platform-by-platform breakdown, even if your software aggregates the total. If HMRC cross-references platform reports, platform-level granularity protects you.
• Connect your accounting software to your platforms where integrations exist. Manual import of settlement CSVs works, but automated feeds reduce reconciliation errors.

See settlement payout reconciliation if you want help structuring this across Amazon, eBay, Etsy and Shopify in one place. The marketplace sellers hub covers the wider tax picture, and the Amazon seller guide goes into FBA-specific record-keeping.

The generic MTD mechanics: go here for those

This page covers the seller-specific slice of MTD ITSA. The standard mechanics, including how quarterly updates work, which software is on the HMRC-compatible list, how to sign up and what an End of Period Statement looks like, are covered in full in the MTD ITSA guide on Holloway Davies. For deadline specifics see the April 2026 deadline guide.

Common failure modes for sellers

Measuring income per platform instead of in aggregate. The threshold test is applied to the combined total. A seller active on three platforms who checks each one separately and concludes none triggers the threshold may be significantly wrong. Add them up first.

Leaving reconciliation until the first quarterly update. The first quarterly update for a seller in scope from 6 April 2026 covers the period to 5 July 2026, with a submission deadline of 5 August 2026. If settlement data for April through June has not been reconciled, the quarterly update is built on guesses. MTD is a recurring discipline, not a year-end job.

Treating platform payouts as income figures. The net payout after platform fees is not your income. Gross sales are income; platform fees are an expense. Using the payout as the income figure understates income and overstates (or loses track of) the expense deduction. This matters both for the threshold test and for each quarterly update.

Assuming MTD does not apply because "the platform reports it". Platform reporting is the platform's obligation. MTD ITSA is yours. Both exist simultaneously.

If your current record-keeping is not set up to meet these requirements, get in touch about settlement reconciliation and MTD setup or use the seller take-home calculator to check whether your income level puts you inside the thresholds.