MTD for Shop & Retail Owners —
Stock, Sales, Commission and Your Threshold
Use total sales before stock, wages and rent. Count only your commission on lottery and bill-payment services, not the money you collect on others’ behalf.
- Sole-trader shop owners are tested on total sales, not profit, so a shop with a thin margin can be over the line.
- Commission on lottery, PayPoint and parcel services counts as your income. The money you collect and pass on to the operator does not.
- A shop run through a limited company or a partnership is outside MTD for Income Tax at the moment.
Independent shops run on high sales and thin margins, which is the combination that catches people out under Making Tax Digital. A convenience store or newsagent can take £75,000 a year and keep a fraction of it, yet the threshold is tested on the sales, not the profit. This guide covers what counts for a retailer, how to treat lottery and bill-payment commission, and how to keep records when your tills and your stock are the main sources.
Are Independent Shop Owners in MTD?
Yes, if you are a sole trader and your sales (together with any property or other self-employed income) are over the threshold for the relevant tax year. The first line was £50,000, tested on your 2024–25 return:
| Tax Year Tested | Gross Income Over | MTD Start Date |
|---|---|---|
| 2024–25 | £50,000 | 6 April 2026. Live now |
| 2025–26 | £30,000 | 6 April 2027 |
| 2026–27 | £20,000 | 6 April 2028 |
Most single-owner independent shops pass the first or second line. A shop run through a limited company or a partnership is outside Making Tax Digital for Income Tax for now, so check which structure your last tax return used. See the partnerships guide and sole trader vs limited company.
Sales, Commission and What Counts as Income
| Income | Counts towards the threshold? |
|---|---|
| Goods you buy and sell at your own price | Yes, total sales |
| Newspapers and magazines (your sales value) | Yes |
| Commission earned on lottery and scratchcards | Yes, the commission only |
| PayPoint, bill payment and parcel handling commission | Yes, the commission only |
| Online or delivery sales | Yes |
| Rental income from a flat above the shop | Yes, added to the total |
| VAT charged to customers | No |
| Lottery stakes and bill payments you collect for others | No |
The distinction is whether you are selling as the principal or acting as an agent. If you sell a product at your own price, the sale is yours. If you take stakes or bill payments on behalf of an operator and keep a commission, the commission is your income. Your operator statement shows which is which, and if you are unsure ask your accountant, because the difference can move the total by tens of thousands.
Stock, Wastage and Shrinkage
Stock is the cost that defines a shop. The stock you buy is an expense of the business, whether you record it when you pay (cash basis) or when you receive the invoice (traditional accounting). If your stock changes a lot through the year, ask your accountant which method suits you, because it affects how profit looks quarter by quarter.
- Record each supplier invoice for stock as it arrives, and match it to the payment.
- Record wastage, out-of-date goods and shrinkage as separate lines, so the loss is visible rather than hidden in cost of sales.
- Keep EPOS end-of-day reports, or an export of them, for every trading week.
- Keep cash-and-carry receipts, since they cover goods bought for resale and consumables together.
| Cost | Notes |
|---|---|
| Stock bought for resale | The largest cost; keep every invoice and receipt |
| Wages and employer costs | Paid through payroll; your own drawings are not an expense |
| Rent, rates and utilities | Premises costs for the shop |
| EPOS, card terminal and software fees | Subscriptions and per-transaction fees |
| Shop fittings and equipment | Shelving, fridges and tills are usually capital allowances |
| Insurance, licences and security | Alarm, CCTV monitoring, premises and public liability |
Selling Online as Well as in the Shop
If you also sell on your website or a marketplace, those sales add to the same total. Record shop sales and online sales as separate income categories so you can see which is growing, and record platform commission and postage as costs. See Etsy and eBay sellers and Amazon sellers for how platform statements are handled.
VAT matters here too. Once your taxable turnover goes over £90,000 you must register for VAT, and VAT-registered shops use MTD for VAT already. Your Income Tax MTD figure is measured excluding the VAT you charge.
Quarterly Updates for a Shop
Each quarterly update is a summary of income and costs for three months, sent from compatible software. With EPOS data and supplier invoices already in the system, an update is mostly a check that the numbers look right.
| Update | Period (standard) | Deadline | 2026–27 |
|---|---|---|---|
| Q1 | 6 Apr – 5 Jul 2026 | 7 Aug 2026 | No points if late |
| Q2 | 6 Jul – 5 Oct 2026 | 7 Nov 2026 | No points if late |
| Q3 | 6 Oct 2026 – 5 Jan 2027 | 7 Feb 2027 | No points if late |
| Q4 | 6 Jan – 5 Apr 2027 | 7 May 2027 | No points if late |
Late quarterly updates carry no penalty points in 2026–27, but from 6 April 2027 each missed deadline earns a point, and four points means a £200 fixed penalty. HMRC also began signing up eligible customers from September 2026, so it is safer to register yourself. See the registration guide and the software comparison.
Worked Example
Priya’s newsagent and convenience store, run as a sole trader
Priya keeps about £11,000 after stock, wages and rent, but her threshold figure is the £80,200 of sales and commission. The lottery stakes she collected for the operator are not counted. She has been in MTD since April 2026.
Frequently Asked Questions
Do shop owners have to use Making Tax Digital?
If you are a sole trader and your sales plus any property income were over £50,000 in 2024–25, yes, from 6 April 2026. Over £30,000 in 2025–26 means April 2027, and over £20,000 in 2026–27 means April 2028.
Does the threshold use profit or sales?
Sales, before stock, wages and rent. A shop selling £75,000 of goods and keeping £10,000 is tested on the £75,000.
How do I count lottery and PayPoint income?
Count your commission as income. Money you collect on behalf of an operator and pass on is not your income. Your operator statement shows the commission paid to you.
My shop is a limited company. Am I in MTD?
Not for Income Tax. Limited companies are outside Making Tax Digital for Income Tax at present, and dividends are not qualifying income. Your company still has its own tax and VAT duties.
Do I count VAT in my sales?
No. If you are VAT-registered, use your sales figure excluding the VAT you collect when testing against the MTD threshold.
Can I use my EPOS reports as my digital records?
Often yes, if the data is imported or entered into compatible software. Keep the end-of-day reports as source records and send the quarterly summary from your software.
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