Making Tax Digital for eCommerce Sellers: What UK Amazon, Shopify & eBay Businesses Need to Know 

Making Tax Digital for eCommerce sellers depends on your business structure. If you are VAT registered, you must keep digital VAT records and file VAT returns through HMRC compatible software. Sole traders and landlords with qualifying income over £50,000 must also follow MTD for Income Tax from 6 April 2026.

Marketplace sales rarely follow a straight line. Fees, refunds, delivery charges, discounts and delayed payouts all affect your books and your VAT return, so each part of an order needs to be recorded, not just the amount that lands in your bank.

This guide covers who must comply, the 2026 to 2028 dates, how to record Amazon, Shopify and eBay data, and what to do before the next deadline on 7 November 2026.

Which Version of Making Tax Digital Applies to Your eCommerce Business?

Your business	MTD for VAT	MTD for Income Tax
VAT registered limited company	Yes	No
VAT registered sole trader	Yes	Yes, if qualifying income is over the threshold
Sole trader, not VAT registered	No	Yes, if qualifying income is over the threshold
Occasional seller of personal items	No	No, unless you are trading

• VAT registered: You must follow MTD for VAT whichever channels you sell through. MTD for VAT has applied to every VAT registered business since April 2022. This means keeping VAT records digitally and filing returns with HMRC compatible software.

• Sole trader: MTD for Income Tax applies from 6 April 2026 if your qualifying income from self employment and property was over £50,000 on your 2024/25 tax return. This is your gross income before expenses.

• Both rules: A sole trader who is registered for VAT may have to fulfill both prerequisites. While MTD for Income Tax modifies how qualified sole traders report self-employment income and costs to HMRC, MTD for VAT addresses VAT returns. 

• Future thresholds: Beginning in April 2027 and continuing until April 2028, MTD for Income Tax will extend to eligible income exceeding £30,000 and £20,000, respectively. 

• Limited companies: MTD for Income Tax does not apply to limited companies. A VAT registered limited company must still follow MTD for VAT.

• Occasional sales: Selling unwanted personal items now and then is not necessarily trading. Regular online sales made to earn a profit can count as trading, so keep organised records.

What Making Tax Digital Means for Marketplace Sellers in Practice

For eCommerce sellers, MTD changes the way VAT information is organised, not how you sell. This applies to both VAT and Income Tax records.

Moving from scattered reports and end of quarter calculations to a continuous digital process is a significant change. Businesses should organise transaction data as trading occurs rather than collecting Amazon settlements, Shopify order exports and eBay payment data only when a return is needed.

This gives you a clearer picture of what sits behind each payout. It also makes it easier to spot missing fees, duplicated sales, unrecorded refunds or incorrect VAT coding before they become reporting problems.

MTD for VAT for Amazon, Shopify and eBay Sellers

This is the part of Making Tax Digital that affects most eCommerce businesses, including every VAT registered limited company.

What you must do

Keep VAT records digitally, use HMRC compatible software to file VAT returns, and make sure the data moves between systems through digital links. If you use spreadsheets, they must be connected to HMRC through bridging software.

What to record for each marketplace order

Record gross sales, the VAT on each sale, marketplace fees, payment processing fees, refunds and credit notes, delivery charges and the payout. Recording only the net payout leaves out the sales, fees and refunds that your VAT return depends on.

Penalties

Late VAT returns add penalty points. Once the points threshold is reached, a £200 penalty applies. VAT and Income Tax points are counted separately.

Are You Trading or Just Selling? Why It Matters 

How you declare income to HMRC, and whether MTD for Income Tax will apply to you in future, depends on whether you are trading or only making occasional personal sales.

You are not necessarily operating a business if you occasionally sell unwanted personal items like worn clothing or household goods. On the other hand, trading may be indicated by regularly buying or making goods to sell for a profit, running an online store, keeping inventory, advertising goods, or selling continuously on Amazon, Shopify, or eBay. Gross trading income of up to £1,000 in a tax year is covered by the trading allowance and usually does not need to be reported.

This distinction matters because MTD for Income Tax is being introduced for landlords and sole traders based on their qualifying income from property and self-employment. It applies from 6 April 2026 to anyone whose qualifying income was over £50,000 on their 2024/25 return. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028.

Whether your online activity has become a business is a practical question for an eCommerce seller. If it has, keep accurate records of all sales, fees, refunds, stock purchases and allowable costs straight away. Good records make it easier to understand your taxable profit, complete your Self Assessment accurately and prepare for MTD for Income Tax if your income meets the threshold.

Thresholds, Start Dates and the 2026/27 Temporary Exemption 

The rollout depends on your qualifying income, business structure and tax situation.

• 6 April 2026: Starting from April 6, 2026, sole traders and landlords with qualified income exceeding £50,000 for the 2024–2025 tax year must utilise MTD for income tax. 

• 6 April 2027: The entry threshold falls to qualifying income over £30,000, based on income reported for the 2025/26 tax year. 

• 6 April 2028: The threshold falls again to qualifying income over £20,000, extending MTD for Income Tax to more smaller online businesses.

• Qualifying income: This often refers to gross income from property and self-employment for eCommerce sellers before business expenses are subtracted. It differs from taxable profit. 

• Potentially affected sellers: If a person has more complicated circumstances, such as trust or estate income, averaging relief claims, qualifying foster-carer income, specific non-resident or dual-resident status, or visiting-performer income, the exemption may be applicable. 

Do Marketplaces Report Your Sales to HMRC? 

Yes, in many cases. Platforms such as Amazon, eBay and Etsy must collect seller details and report income data to HMRC. Whether a Shopify store is affected depends on how the sale is facilitated, so check how your payments and channels are set up.

• Marketplace reporting: Digital platforms that allow vendors to provide products or services are required to gather seller information and provide pertinent income data to HMRC. Marketplaces like Amazon and eBay are examples of this; a Shopify store might be different since Shopify mostly offers eCommerce software rather than serving as the buyer-facing marketplace for each transaction. 

• Annual reporting deadline: Platforms generally release data by January 31st for the preceding year. For example, data submitted to HMRC by January 31, 2027, would include sales made through a marketplace between January and December 2026. 

• Information HMRC may receive: Your name, address, bank or payment account information, tax identification information when applicable, total payments or revenue, transaction volume, and any fees, commissions, or taxes that the platform has deducted can all be found in the platform report. 

• Small-seller exclusion: If a seller of products makes less than 30 sales and receives less than £ 2,000 in a calendar year, a platform might not be required to declare them. Both requirements must be fulfilled. A seller may still be subject to reporting if they make 15 transactions totaling £ 2,500 or 40 sales totaling £1,000.

•  Marketplace data is not full bookkeeping: Platform reports are useful for HMRC, but they do not replace your own accounting records for Making Tax Digital for eCommerce sellers. For example, an Amazon seller could have £30,000 in gross sales, £4,500 in Amazon fees, £2,000 in refunds and a £23,500 net payout. Recording only the payout would omit the underlying sales, fees and refunds needed for accurate accounts and VAT reporting. 

What Quarterly Reporting Actually Looks Like 

Quarterly reporting under Making Tax Digital for eCommerce sellers is best understood as a regular bookkeeping check-in with HMRC. You send updates on sales and expenses recorded during each period, while your final tax position is confirmed after the end of the tax year. 

• Four updates a year: Eligible sole traders submit one update for each quarterly period. The standard deadlines are 7 August, 7 November, 7 February and 7 May. 

• Sales and expenses: Each quarterly update includes a summary of income and expenses recorded in that particular quarter. This includes product sales, marketplace fees, delivery costs, advertising spend, software subscriptions and stock-related expenses.

•  Shopify example: Total Shopify sales for April through June, customer refunds, Shopify app charges, Shopify Payments fees, packing costs, and advertising expenses could all be included in a quarterly update for MTD for Shopify sellers. By August 7th, the vendor submits the condensed data from their accounting program. 

• eBay example: The accounting software should record gross eBay sales instead of just the net payment received for MTD for eBay sellers. For instance, rather than just showing as a £6,750 settlement in the bank account, £8,000 in eBay sales, £900 in selling fees, and £350 in refunds should be displayed as distinct transactions. 

• Standard periods: The 6 April to 5 July, 6 April to 5 October, 6 April to 5 January, and 6 April to 5 April are the default quarterly periods. There may also be a calendar-quarter option that runs from April 1 to June 30, July 1 to September 30, October 1 to December 31, and January 1 to March 31. 

• A live tax estimate: Your program can provide a more accurate estimate of the income tax due based on the data that has already been provided after an update is sent. Figures may be adjusted at a later time; the quarterly update is not a final tax estimate. 

• VAT remains separate: Even if you are registered for VAT, you still need to prepare and file VAT returns under MTD. VAT returns are not replaced by quarterly income tax updates, and the reporting periods could not line up. 

What Limited Company eCommerce Sellers Need to Know Instead 

The trade income of a limited company that runs an Amazon, Shopify, or eBay business is now exempt from MTD income tax. Rather, your company’s primary duties include annual accounts, Companies House filings, Corporation Tax reporting, and VAT compliance when registered. 

• MTD for VAT: Unless there is an exemption, the business that is VAT registered must maintain the necessary VAT records digitally and file VAT returns using software that is compatible. 

• Corporation Tax: Corporation tax is imposed on business profits. Maintaining accounting records, filing a Company Tax Return with HMRC, and paying any Corporation Tax payable by the relevant deadlines are all requirements for your business. 

• Annual accounts: Even if there has been little to no trading activity, a limited company is nevertheless required to produce and submit statutory annual accounts to Companies House. 

• Confirmation Statement: To verify that the information about their registered company is still correct, businesses must submit a Confirmation Statement to Companies House. 

• Marketplace bookkeeping: Keep separate records of the gross sales, VAT, marketplace commissions, payment fees, refunds, advertising charges, inventory expenditures, and payouts. For instance, if Amazon pays £15,000 after deducting £2,000 in fees and £1,000 in refunds, you should document the underlying sales, expenditures, and adjustments in addition to the £15,000 bank receipt. 

• Making Tax Digital for eCommerce sellers: The first MTD focus for limited companies is generally VAT rather than the quarterly MTD for updates on income tax. VAT returns, year-end accounts, and corporation tax records can still be made more precise and manageable by utilising integrated accounting software. 

How E2E Accounting Supports Amazon, Shopify, eBay and Etsy Sellers 

E2E Accounting helps eCommerce sellers on Amazon, Shopify, eBay, and Etsy by simplifying the bookkeeping process for marketplace sales, fees, refunds, advertising expenses, inventory purchases, and bank reimbursements. The team can assist in reconciling each settlement against the underlying transactions rather than just entering the final amount paid into the bank, providing sellers with a more accurate view of turnover, expenditures, VAT, and profitability. 

This methodical technique helps in maintaining well-organised digital records throughout all sales channels for Making Tax Digital for eCommerce companies. It can facilitate the production of VAT returns, lower the possibility of overlooked marketplace fees or refunds, and offer more clear financial data for cash flow planning, tax compliance, and company expansion. 

FAQs: Frequently Asked Questions