If you sell regularly on Etsy, eBay, Vinted, Amazon Marketplace or any other digital platform, Making Tax Digital likely applies to you. Since January 2024, HMRC receives annual reports of your earnings from every major selling platform. Your qualifying income for MTD is your gross sales revenue — the total amount customers paid you, before platform fees.
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This guide covers exactly what counts as trading income, how the £1,000 trading allowance interacts with MTD, how to distinguish trading from casual selling, and what records you need to keep.
HMRC already has your sales data
Since 1 January 2024, the UK implemented the OECD Digital Platform Reporting rules. Every major platform — Etsy, eBay, Vinted, Amazon Marketplace, Airbnb, Fiverr, Upwork and others — is legally required to report the gross income of UK sellers to HMRC annually.
HMRC receives a report showing your name, address, National Insurance number (where held), and gross sales for the year. This data is matched against your tax records. Under MTD, your quarterly updates add further data points that HMRC can cross-reference against platform reports.
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The practical consequence: If your Etsy sales were £38,000 last year and your Self Assessment showed £25,000 of self-employment income, HMRC has already noticed the gap. Under MTD, quarterly reporting makes ongoing discrepancies visible in real time rather than just at year-end.
Trading income vs casual selling — the critical distinction
Not all selling on eBay or Vinted is trading income. HMRC distinguishes between:
Trading: Buying goods to resell for profit, making items to sell, running a commercial operation with intent to profit — this is self-employment income and counts for MTD.
Casual disposal: Selling your own used possessions — old clothes, household items, collections you no longer want — is generally not trading and does not count.
HMRC uses the badges of trade test to distinguish the two. The more of these that apply, the more likely HMRC is to treat activity as trading:
🔴 Likely Trading (counts for MTD)
→You buy goods specifically to resell at a profit
→You make or manufacture items to sell
→You sell frequently and systematically
→You modify or improve items before selling
→You have a business-like approach (packaging, branding)
→The sales are a significant income source
🟢 Likely Not Trading (may not count)
→Occasional sales of genuinely owned possessions
→Clearing out unwanted household items
→One-off sale of a specific item
→No profit motive — just getting rid of things
→Infrequent, irregular activity
→Items held for personal use before sale
If you are unsure whether your activity constitutes trading, the default position is to treat it as trading and report it. The consequences of not reporting trading income are significantly worse than reporting income that turns out not to be taxable.
The £1,000 trading allowance — and how it interacts with MTD
The trading allowance gives every individual £1,000 of tax-free trading income per year. If your gross trading income is below £1,000, you have no tax to pay and no Self Assessment requirement for that income.
However — and this is crucial — the trading allowance does not reduce your qualifying income for the MTD threshold. Even if you claim the allowance and your taxable profit is zero, your gross sales still count towards the threshold.
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Trading allowance does not affect the MTD threshold. An Etsy seller with £52,000 in gross sales who claims the £1,000 trading allowance has MTD qualifying income of £52,000 — not £51,000. The allowance reduces taxable profit, not threshold income.
How platform fees interact with qualifying income
Platform fees — Etsy transaction fees, eBay final value fees, PayPal or payment processing charges — are business expenses, not deductions from income. Your qualifying income is your gross sales revenue before any fees are deducted.
📊 Example 1 — Etsy handmade seller
Total Etsy sales revenue (gross)£48,500
Etsy transaction and listing fees−£5,800 (expense)
Materials and supplies−£14,200 (expense)
Taxable profit£28,500
MTD qualifying income (gross sales)£48,500
🟡 Below April 2026 threshold — mandatory from April 2027 (£30k threshold)
📊 Example 2 — eBay reseller
Total eBay sales (gross, all items)£62,000
Cost of goods purchased to resell−£38,000 (expense)
eBay fees and PayPal charges−£8,200 (expense)
Packaging and postage−£3,400 (expense)
Taxable profit£12,400
MTD qualifying income (gross sales)£62,000
⚠ Mandatory April 2026 — gross sales exceed £50,000 even though profit is only £12,400
This second example is the most important lesson for online resellers. Gross sales of £62,000 with only £12,400 profit still triggers mandatory MTD compliance. The threshold is not about profit — it is about gross revenue.
What counts as qualifying income by platform
Platform
What Counts
What Doesn't Count
Notes
Etsy
Gross sales revenue
Etsy fees (expense), refunds
Download annual earnings statement from Etsy
eBay
Gross selling price
eBay fees (expense), personal items
Personal item sales may not be trading
Vinted
Gross if trading
Personal clothing sales (not trading)
Systematic reselling = trading
Amazon
Gross sales revenue
Amazon fees (expense), returns
FBA fees are expenses not deductions
Depop
Gross if trading
Occasional personal item sales
Apply badges of trade test
Not.on.the.High.St.
Gross sales revenue
Platform commission (expense)
Same treatment as Etsy
Records you must keep under MTD
MTD requires digital records. For online sellers, this means:
Annual or quarterly earnings statements from each platform (downloadable from your seller account)
Records of cost of goods — what you paid for items purchased to resell
Platform fee invoices or statements
Packaging and postage costs
Any other business expenses with digital documentation
Bank or payment account statements showing receipts
Most platforms provide downloadable CSV or PDF reports showing gross sales, fees, and refunds. These should be imported into your MTD software quarterly to keep records current.
Software links are affiliate — help fund CheckMyMTD. Recommendations based on online seller needs.
MTD quarterly deadlines for online sellers
Quarter
Period
Deadline
2026–27 Soft Landing
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
Final Declaration
Full year 2026–27
31 Jan 2028
Not soft-landed
Frequently asked questions
Probably not, if these are genuinely your own used possessions sold occasionally. Selling personal items is not trading income. However, if you buy clothing specifically to resell, or sell very frequently with a profit motive, HMRC would likely treat this as trading. Vinted must now report seller earnings to HMRC regardless — so if your Vinted income is significant, it is worth getting clarity on whether it counts as trading.
Yes — the MTD threshold is based on gross sales revenue, not profit. £55,000 of gross sales puts you above the £50,000 threshold regardless of your expenses or profit margin. You are subject to MTD from April 2026.
Yes. All self-employment income is combined for the MTD threshold. If your Etsy gross sales are £28,000 and your eBay gross sales are £24,000, your combined qualifying income is £52,000 — above the April 2026 threshold. Each platform is a separate income stream within your single self-employment business.
Each quarterly update reports actual income and expenses for that three-month period. There is no requirement to smooth or average. A Christmas-heavy seller with 60% of income in Q3 (October–December) simply reports high Q3 income and lower figures in other quarters. The annual total across all four quarters is what determines your overall tax position.
No — PAYE salary is excluded from qualifying income. Only your gross online selling income (and any other self-employment or rental income) counts. A teacher earning £35,000 PAYE plus £18,000 in Etsy gross sales has qualifying income of only £18,000 — below the April 2028 threshold.
Check your online seller MTD position
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