MTD for Etsy and eBay Sellers
If you sell goods on Etsy, eBay, Amazon, or other online marketplaces, you may be caught by MTD. The rules depend on whether your selling is a trade or a hobby, and how much you earn.
Trading vs Hobby
Not all online selling counts as self-employment. Occasional selling of personal items (clearing out your wardrobe on eBay) is not trading. But if you regularly buy stock to sell, or make items to sell on Etsy, you are probably trading.
Indicators of trading include:
- Buying items specifically to resell
- Making products to sell
- Selling regularly and repeatedly
- Having the intention to make a profit
- Running your sales like a business
If you are trading, your income is self-employment income and counts towards the MTD threshold.
The £1,000 Trading Allowance
If your gross trading income is under £1,000 per tax year, you do not need to register for Self Assessment or MTD. This allowance is automatic — you do not need to claim it.
Above £1,000, you must register as self-employed and report your income. You can either deduct the £1,000 trading allowance instead of your actual expenses, or deduct your actual expenses — whichever gives you a better result.
When MTD Applies
If your gross self-employment income from online selling exceeds £50,000 (from April 2026) or £30,000 (from April 2027), you must comply with MTD.
Gross income means the total value of your sales before deducting platform fees, cost of materials, postage, or any other expenses.
Managing Your Records
Online sellers have specific record-keeping needs:
Sales records. Each sale should be recorded with the date, amount, and item description. Your platform provides sales data, but your MTD software needs to capture it.
Cost of goods. The materials, stock, or items you purchase to sell are a business expense. Track every purchase.
Platform fees. Etsy listing fees, eBay final value fees, PayPal/payment processing fees — all are deductible expenses.
Postage and packaging. Every parcel you send is a business cost. Keep records of postage and packaging material purchases.
Home workspace. If you make or store items at home, you can claim a proportion of your home costs.
Practical Setup
- Use MTD-compatible software like Accounted
- Connect your business bank account or PayPal
- Download sales reports from your platform regularly
- Record cost of materials and stock purchases
- Keep receipts for postage, packaging, and supplies
Platform Reporting to HMRC
From January 2025, online platforms like eBay, Etsy, and Amazon must report seller data to HMRC under DAC7 (the EU directive on platform reporting, adopted into UK law). This means HMRC already knows how much you are selling — another reason to ensure your records are accurate.
Penny, our AI bookkeeper, categorises your expenses automatically and flags anything that looks wrong. Try it free for 14 days.
Tax & Compliance Specialists
Our tax specialists have decades of combined experience in UK sole trader and small business taxation, MTD compliance, and HMRC submissions. All content is reviewed against current HMRC guidance before publication and updated quarterly to reflect legislative changes.
Ready to try Accounted?
Join UK sole traders who are simplifying their bookkeeping and tax.
Start your 14-day free trial