MTD for Income Tax 2026: A Guide for Online Sellers
Short answer: Making Tax Digital (MTD) for Income Tax has been compulsory since 6 April 2026 for sole traders and landlords whose qualifying income was over £50,000 on their 2024 to 2025 tax return. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. “Qualifying income” means turnover, so marketplace sellers must count their gross sales, not the smaller payouts that land in their bank account.
If you’re in, you keep digital records, send HMRC a cumulative update every quarter through compatible software, and file your tax return through that software by 31 January. This guide is for UK online sellers: Etsy makers, Amazon and eBay sellers, Vinted resellers and Shopify store owners. It covers who has to join and when, how to count your income, the 2026 to 2027 deadlines and penalties, and how to turn your platform reports into quarterly figures.
Do I need to use MTD for Income Tax? Find your situation
Section titled “Do I need to use MTD for Income Tax? Find your situation”| Your qualifying income (self-employment + property, before expenses) | Tax return HMRC looks at | You must use MTD from |
|---|---|---|
| Over £50,000 | 2024 to 2025 | 6 April 2026 (already live) |
| Over £30,000 | 2025 to 2026 | 6 April 2027 |
| Over £20,000 | 2026 to 2027 | 6 April 2028 |
| £20,000 or less | Any | Not required. You carry on with a normal Self Assessment return |
| You trade only through a limited company | Not applicable | Not required. Companies aren’t in MTD for Income Tax |
| You’re a partner in a partnership | Not applicable | Not yet. HMRC hasn’t set a date for partnerships |
These dates come from gov.uk’s Find out if and when you need to use Making Tax Digital for Income Tax. Once you’re in, you stay in until your qualifying income has been below the threshold for three tax years in a row.
Watch this date: the Autumn Budget 2026 is on 28 October 2026. The £30,000 and £20,000 phases are already announced, and we couldn’t find any change to them in official documents as of today. We’ll update this page if the Budget moves either date.
What is Making Tax Digital for Income Tax?
Section titled “What is Making Tax Digital for Income Tax?”MTD for Income Tax (often shortened to MTD ITSA, for Income Tax Self Assessment) is HMRC’s new way of doing Self Assessment for the self-employed and landlords. It doesn’t change how much tax you pay or when you pay it. It changes how you keep records and report:
| Old Self Assessment | MTD for Income Tax | |
|---|---|---|
| Records | Paper, spreadsheets or anything you like | Digital records in compatible software (or a spreadsheet linked to bridging software) |
| Reporting during the year | Nothing | A cumulative quarterly update, four times a year |
| Tax return | Online or paper, by 31 January | Through your MTD software, by 31 January |
| Payment dates | 31 January and 31 July | Unchanged: 31 January and 31 July |
| Late filing penalty | £100 fixed penalty, then more | Penalty points, with a £200 penalty at 4 points |
The tax return at the end of the year is what HMRC used to call the “final declaration”. It’s where you add your other income (wages, savings interest, dividends), claim reliefs and confirm your figures.
MTD for VAT is a different scheme
Section titled “MTD for VAT is a different scheme”People searching “MTD” often mean MTD for VAT. That one has applied to every VAT-registered business, whatever its size, since April 2022 (gov.uk). You keep digital VAT records and file VAT returns through software, usually quarterly.
The two schemes are completely separate:
- A sole trader with £60,000 of Etsy sales is in MTD for Income Tax but not MTD for VAT, because they’re under the £90,000 VAT threshold.
- A limited company turning over £150,000 is in MTD for VAT but not MTD for Income Tax.
- A VAT-registered sole trader with £100,000 of sales is in both, with two sets of deadlines.
What counts as qualifying income?
Section titled “What counts as qualifying income?”HMRC defines qualifying income as your total income from self-employment and property, before expenses. In other words, turnover.
| Counts towards the MTD threshold | Doesn’t count |
|---|---|
| Gross sales from every sole-trader business you run (Etsy, eBay, Amazon, Shopify, markets, commissions) | Wages and salary taxed through PAYE |
| Postage you charge buyers | State and private pensions |
| UK property income (rent), and foreign property income if you’re UK resident | Dividends, including from your own limited company |
| Your share of rent from a jointly owned property | Your share of profit from a partnership |
| VAT, but only if you choose to include it in your income under the cash basis | Savings interest |
Add all your sources together. Someone with £27,000 of self-employment sales and £25,000 of rent has £52,000 of qualifying income, which is over £50,000, even though neither source is on its own.
Do I count gross sales or the payouts I receive?
Section titled “Do I count gross sales or the payouts I receive?”Gross sales. This is the trap most marketplace sellers fall into.
Etsy, Amazon, eBay and Vinted all take their cut before they pay you. Selling fees, payment processing, ads, postage labels bought through the platform and VAT on the platform’s fees all come out first. What reaches your bank account can be half of what your buyers actually paid.
HMRC’s guidance on digital records is clear that when income arrives with expenses already taken off, you should find out the full amount before deductions and record that. The fees then go in as expenses. Your profit comes out the same either way, but your turnover doesn’t, and turnover is what decides whether you’re in MTD (and whether you need to register for VAT).
It also matters because platforms report you. Under the reporting rules for digital platforms, marketplaces send HMRC details of sellers who make 30 or more sales of goods, or receive more than about £1,700 (€2,000), in a calendar year. HMRC can see your gross figure, so a tax return that shows only your payouts stands out.
Which tax year’s income decides when you join?
Section titled “Which tax year’s income decides when you join?”HMRC looks at the tax return you filed for the year two years before your MTD start date:
| Your start date | Tax year that decides | That return’s filing deadline |
|---|---|---|
| 6 April 2026 | 2024 to 2025 (6 April 2024 to 5 April 2025) | 31 January 2026 |
| 6 April 2027 | 2025 to 2026 (6 April 2025 to 5 April 2026) | 31 January 2027 |
| 6 April 2028 | 2026 to 2027 (6 April 2026 to 5 April 2027) | 31 January 2028 |
HMRC writes to people it thinks are in scope, but you’re responsible for checking even if no letter arrives. If you started trading partway through a year, HMRC annualises your income where it can: six months of sales are doubled to estimate a full year.
Worked example: an Etsy seller with £55,000 of sales and £30,000 of payouts
Section titled “Worked example: an Etsy seller with £55,000 of sales and £30,000 of payouts”Megan makes ceramic mugs in Stoke-on-Trent and sells only on Etsy as a sole trader. For the 2024 to 2025 tax year, her Etsy figures were:
| Amount | |
|---|---|
| Gross sales, including postage charged to buyers | £55,000 |
| Less Etsy fees and Etsy Ads | −£11,200 |
| Less VAT Etsy charges on those fees (20%) | −£2,240 |
| Less postage labels bought through Etsy | −£11,560 |
| Paid out to her bank account | £30,000 |
Megan assumed she earned £30,000, well under the £50,000 threshold. But her qualifying income is £55,000: £11,200 + £2,240 + £11,560 = £25,000 of deductions, and £30,000 + £25,000 = £55,000. She’s been required to use MTD for Income Tax since 6 April 2026.
If she put £30,000 as her turnover on her 2024 to 2025 return and claimed none of the fees as expenses, her profit may be close to right, but her turnover is wrong. That’s why HMRC never wrote to her. She can still correct that return until 31 January 2027 (12 months after its filing deadline).
What Megan should do now, in late October 2026:
- Sign up today on gov.uk and pick compatible software.
- Record her 2026 to 2027 sales gross, with fees, ads, VAT on fees and postage labels as separate expenses.
- Send her first cumulative update (6 April to 5 October 2026) by 7 November 2026. She missed the 7 August deadline for the first quarter, but there’s no penalty for late quarterly updates in 2026 to 2027. Because updates are cumulative, the November update covers both quarters.
- Keep an eye on VAT. £55,000 is under the £90,000 VAT threshold, but that test also uses gross sales. A busy year could tip her over.
When does MTD for Income Tax start for you?
Section titled “When does MTD for Income Tax start for you?”Worked example: a job plus £25,000 of eBay sales
Section titled “Worked example: a job plus £25,000 of eBay sales”Priya is a nurse in Leicester earning a £34,000 salary through PAYE. In her spare time she buys and resells vintage clothing on eBay as a sole trader. Her gross eBay sales are £25,000 in 2025 to 2026 and £26,000 in 2026 to 2027.
| Check | Her qualifying income | Threshold | Result |
|---|---|---|---|
| 2024 to 2025 return, for April 2026 | £18,000 | £50,000 | Not in |
| 2025 to 2026 return, for April 2027 | £25,000 | £30,000 | Not in |
| 2026 to 2027 return, for April 2028 | £26,000 | £20,000 | In from 6 April 2028 |
Her £34,000 salary is ignored completely: only her eBay income counts. Her first quarterly update will cover 6 April to 5 July 2028 and be due by 7 August 2028. Until then she files a normal Self Assessment return each year. If her 2025 to 2026 eBay sales had been £31,000 instead, she’d have been in a year earlier, from April 2027.
For more on when casual selling becomes a business, see the eBay tax guide and the £1,000 trading allowance.
Quarterly updates and deadlines for 2026 to 2027
Section titled “Quarterly updates and deadlines for 2026 to 2027”Each quarterly update is cumulative. It covers everything from 6 April to the end of the latest period, so a mistake in one quarter can simply be fixed in the next. Your software adds up your digital records and sends HMRC totals for income and each expense category. You must send an update even if you sold nothing in that quarter.
The deadlines are the same whether you use standard periods (aligned to the tax year) or calendar periods (if your accounts run 1 April to 31 March):
| Update | Standard period | Calendar period | Deadline |
|---|---|---|---|
| 1 | 6 April to 5 July 2026 | 1 April to 30 June 2026 | 7 August 2026 (passed) |
| 2 | 6 April to 5 October 2026 | 1 April to 30 September 2026 | 7 November 2026 (next) |
| 3 | 6 April 2026 to 5 January 2027 | 1 April to 31 December 2026 | 7 February 2027 |
| 4 | 6 April 2026 to 5 April 2027 | 1 April 2026 to 31 March 2027 | 7 May 2027 |
| Tax return for 2026 to 2027 | 31 January 2028 |
A few rules worth knowing:
- Pick calendar periods before your first update. You can’t switch for the rest of the tax year once you’ve sent one.
- You can send early, up to 10 days before the period ends, if you don’t expect any more transactions.
- No year-end adjustments are needed for a quarterly update. Accounting adjustments, allowances and reliefs go in the tax return.
- People joining in April 2026 still file a normal return for 2025 to 2026, due 31 January 2027. Their first MTD tax return is for 2026 to 2027.
Simpler records if you’re under £90,000
Section titled “Simpler records if you’re under £90,000”If your turnover from a self-employment source is under £90,000, you don’t have to sort every transaction into HMRC’s expense categories. You only need to record whether each item is income or an expense. If your turnover reaches £90,000, you have to categorise everything in full before your next update. You can also record daily gross takings instead of each individual sale.
MTD for Income Tax penalties
Section titled “MTD for Income Tax penalties”MTD brings in a points-based regime for late submissions and a new late payment regime. The rules below are from gov.uk’s penalties for MTD for Income Tax.
Late submission: penalty points
Section titled “Late submission: penalty points”| 2026 to 2027 (first year) | 2027 to 2028 onwards | |
|---|---|---|
| Missed quarterly update | No penalty | 1 point per missed deadline |
| Late tax return | 1 point | 1 point |
| Points threshold | 4 points | 4 points |
| At the threshold | £200 penalty, plus £200 for each further missed deadline | Same |
You get one point per deadline, even if you have several businesses. Below the threshold, each point expires 24 months after the missed deadline. Once you hit 4 points, they only reset after you’ve met every deadline for 12 months and caught up on anything outstanding from the last 24 months.
Your 2025 to 2026 return, due 31 January 2027, still falls under the old penalties (£100 for being late, then more).
Late payment
Section titled “Late payment”| Days after the due date | 2026 to 2027 |
|---|---|
| Up to 15 | No penalty |
| 16 to 30 | 3% of the tax owed at day 15, or nothing in your first year |
| 31 or more | 3% of the tax owed at day 15, plus 3% of the tax still owed at day 30, plus 10% a year on the balance, charged daily from day 31 |
In your first year under the new rules you get 30 days, not 15, to pay or set up a payment plan before a penalty applies. Interest is charged on top from the day the payment is late. Late payment penalties don’t apply to payments on account. The 3% figures rise to 4% from 2027 to 2028.
Exemptions and deferrals
Section titled “Exemptions and deferrals”Some people don’t have to use MTD for Income Tax, either automatically or by applying. The full list is on gov.uk’s exemptions page.
| Exemption | Do you need to apply? |
|---|---|
| Qualifying income of £20,000 or less | No, automatic |
| No National Insurance number before the start of the tax year | No, automatic |
| Partnerships (for now) | No, automatic |
| Acting under a power of attorney or for someone who can’t deal with HMRC, as declared on your return | No, automatic |
| Foster and kinship carers claiming qualifying care relief, people claiming averaging relief (for example artists and writers), and some trust, estate and non-resident cases | Automatic if on your 2024 to 2025 return, otherwise apply. Deferred until April 2027 at the earliest |
| Ministers of religion, and people claiming Married Couple’s Allowance or Blind Person’s Allowance | Automatic if on your 2024 to 2025 return, otherwise apply. Deferred beyond April 2027 |
| Digitally excluded: age, health or disability stops you using digital devices, you can’t get internet access where you are, or religious beliefs rule it out | Yes, apply to HMRC |
HMRC won’t accept “I’ve always filed on paper”, “I’m not familiar with software” or “it costs time and money” as reasons on their own. An exemption from MTD doesn’t take you out of Self Assessment: you still file a normal return.
How to sign up for MTD for Income Tax
Section titled “How to sign up for MTD for Income Tax”You don’t “register” for MTD: you sign up. To do it you need to be registered for Self Assessment and have filed a return in the last two years. The sign-up service asks for:
- the user ID and password you use for Self Assessment
- your business name (the one on your invoices), business address and trade
- your business start date, if it’s within the last two tax years
- the tax year you’re starting MTD from
- possibly an identity check using a passport or driving licence through a phone app
The steps:
- Check whether you’re exempt using HMRC’s checker.
- Choose compatible software and authorise it to talk to HMRC.
- Sign up online and check every income source is listed, including any you’ve stopped.
- Start keeping digital records from 6 April of your first MTD year.
If you were in scope from April 2026, sign up now. From September 2026, HMRC began signing up people who should be using MTD but haven’t done it themselves. An accountant or bookkeeper can sign you up instead.
Choosing MTD for Income Tax software
Section titled “Choosing MTD for Income Tax software”HMRC doesn’t provide its own software. You have to use a commercial product that’s on HMRC’s software finder. HMRC doesn’t recommend any product. The finder lets you filter by what you need, such as bridging software, free products, or support for property income.
Two broad types:
- Bookkeeping software does everything: records, quarterly updates and the tax return. Well-known accounting packages such as Xero, QuickBooks, FreeAgent and Sage advertise MTD for Income Tax support, and some banks bundle bookkeeping into business accounts. If you’re searching “Xero MTD ITSA” or “QuickBooks MTD ITSA”, check the exact plan, because entry-level plans differ in what they cover.
- Bridging software connects a spreadsheet you already keep to HMRC. It suits sellers who like spreadsheets, but the link must be digital. Once records are in, copying and pasting between cells or programs isn’t allowed.
Free products exist for simple affairs but may cap the number of transactions. Whatever you choose, it must cover all your income sources and handle both quarterly updates and the tax return. If you’re also VAT-registered, check whether the same product does MTD for VAT.
Turning Etsy, Amazon, eBay and Shopify reports into quarterly figures
Section titled “Turning Etsy, Amazon, eBay and Shopify reports into quarterly figures”The aim is the same on every platform: gross sales in, fees out as expenses. Export a report that shows both, for each quarter (or each month, then add them up).
| Platform | Report to export | Watch out for |
|---|---|---|
| Etsy | Shop Manager → Settings → Options → Download Data: the Etsy Payments Sales CSV, plus your monthly statements under Finances (Etsy help) | The Deposits CSV is net of fees, refunds and reserves. Don’t use it for turnover |
| Amazon | Seller Central → Payments → Reports Repository → Date Range Reports: the Summary report for the dates you need, or the Transaction CSV (Amazon help) | Product sales and shipping credits are income. FBA, referral, storage and advertising fees are expenses |
| eBay | Seller Hub → Payments → Reports → Transaction report for a date range, or the monthly financial statement (eBay help) | Payouts are after eBay’s fees. Use the order totals for income |
| Shopify | Analytics → Reports → Finance summary and Total sales breakdown (Shopify help) | Net sales (gross sales less discounts and returns) plus shipping charged is your income. Shopify Payments payouts are after processing fees, which are an expense |
| Vinted | Your sales history and balance activity in the app | Vinted charges sellers no fees. The Vinted fee (formerly Buyer Protection) is paid by the buyer, so leave it out and count the item price you received. See the Vinted tax guide |
Practical tips:
- Use the same cut-off dates as your update periods. For standard periods that’s the 5th of July, October, January and April.
- Refunds reduce income in the period you give them.
- If you sell on several platforms, add them all. One sole-trader business with five sales channels still has one turnover.
- Keep the CSVs. You must keep records for at least five years after the 31 January deadline for that tax year.
What MTD for Income Tax means for the VAT side
Section titled “What MTD for Income Tax means for the VAT side”MTD for Income Tax forces you to look at your gross sales every quarter. Use that for VAT too. The VAT test is also turnover, at £90,000 in any rolling 12 months, and it counts every channel together. A seller who learns through MTD that their real turnover is £55,000 rather than £30,000 is a lot closer to VAT registration than they thought.
Once you pass £90,000, you have 30 days from the end of that month to register for VAT. From then on you also file VAT returns under MTD for VAT. See the VAT threshold guide for the two tests, and VAT threshold monitoring for how to track it.
GoodVat and Making Tax Digital
Section titled “GoodVat and Making Tax Digital”To be clear about what we do: GoodVat doesn’t send MTD for Income Tax quarterly updates or file Self Assessment returns. For those, use HMRC-recognised software or an accountant.
We handle the VAT side, which the same sales data feeds into:
- Watches your rolling 12-month turnover across Shopify, WooCommerce, Amazon, Etsy, Stripe and PayPal, and warns you before you reach £90,000. eBay is coming soon, and we can work from exports for other platforms
- Registers you for VAT with HMRC when you need it
- Calculates the right VAT on each sale and sends compliant invoices
- Files your MTD for VAT returns, and syncs with Xero, QuickBooks, Sage and Zoho Books so your income tax software stays consistent
What is the MTD for Income Tax threshold?
Section titled “What is the MTD for Income Tax threshold?”You must use Making Tax Digital for Income Tax from 6 April 2026 if your qualifying income on your 2024 to 2025 tax return was over £50,000. The threshold drops to £30,000 from 6 April 2027 (based on your 2025 to 2026 return) and £20,000 from 6 April 2028 (based on your 2026 to 2027 return).
Is the MTD threshold based on turnover or profit?
Section titled “Is the MTD threshold based on turnover or profit?”Turnover. Qualifying income is your total self-employment and property income before expenses. For a marketplace seller that means gross sales, not the payouts you receive after the platform has taken its fees, ads and postage labels.
Does my salary count towards the MTD threshold?
Section titled “Does my salary count towards the MTD threshold?”No. Employment income taxed through PAYE, pensions, dividends (including from your own company) and your share of partnership profits don’t count. Only self-employment income and property income count towards qualifying income.
When is the next MTD quarterly update due?
Section titled “When is the next MTD quarterly update due?”For the 2026 to 2027 tax year, the update covering 6 April to 5 October 2026 is due by 7 November 2026. The next ones are due on 7 February 2027 and 7 May 2027. Your tax return for 2026 to 2027 is due by 31 January 2028.
Is there a penalty for a late MTD quarterly update?
Section titled “Is there a penalty for a late MTD quarterly update?”Not for the 2026 to 2027 tax year. HMRC has said there are no penalties for missing a quarterly update deadline in the first year, though you still have to send the updates before you can file your tax return. From 2027 to 2028, each missed deadline earns a penalty point, and reaching 4 points means a £200 penalty.
Do I need to register for MTD for Income Tax?
Section titled “Do I need to register for MTD for Income Tax?”You sign up rather than register. If you’re in scope and haven’t signed up, do it now through gov.uk using your Self Assessment sign-in details. From September 2026 HMRC has also started signing up people who need to use it but haven’t done so themselves.
Is MTD for Income Tax the same as MTD for VAT?
Section titled “Is MTD for Income Tax the same as MTD for VAT?”No. MTD for VAT applies to every VAT-registered business and has done since April 2022, whatever its turnover. MTD for Income Tax is a separate scheme for sole traders and landlords, based on their qualifying income. You can be in one, both or neither.
Does MTD for Income Tax apply to limited companies?
Section titled “Does MTD for Income Tax apply to limited companies?”No. Limited companies pay Corporation Tax, not Income Tax, so they aren’t in MTD for Income Tax. Dividends you take from your own company don’t count towards your qualifying income either. Partnerships are not in scope yet.
Related guides
Section titled “Related guides”- VAT threshold 2026: the £90,000 test, which also uses gross sales
- Sole trader or limited company?: tax, admin and MTD differences between the two
- Etsy tax for UK sellers: income tax, HMRC reporting and VAT on Etsy fees
- eBay tax and HMRC reporting: when reselling becomes trading
- Allowable expenses for online sellers: what you can deduct from your sales
- The £1,000 trading allowance: when small sellers don’t need to file at all
- VAT threshold monitoring: tracking your rolling turnover across channels