If you sell on eBay as a business, the way you report your income to HMRC is about to change. Making Tax Digital for Income Tax (MTD for Income Tax, or MTD ITSA) replaces the once-a-year Self Assessment habit with digital records and quarterly updates.
It arrives in stages. The first wave starts on 6 April 2026 for higher-earning sellers, then the net widens twice more.
This guide is for eBay sole traders who want a straight answer to three questions: when does this apply to me, what exactly do I have to do, and how do I get ready without panic. We'll date every figure, cite gov.uk for every rule, and walk through an illustrative example with real thresholds.
If you only take one thing away, take this: the threshold that decides your start date is your gross sales, not your profit. That catches a lot of eBay sellers off guard.
When does MTD for Income Tax start for eBay sellers?
MTD for Income Tax is mandatory from 6 April 2026 for sole traders and landlords whose qualifying income is over £50,000, from 6 April 2027 for income over £30,000, and from 6 April 2028 for income over £20,000. Your start date depends on your gross self-employment and property income, and HMRC works it out from an earlier year's Self Assessment return.
Here is the rollout, straight from HMRC's guidance.
| Phase | Mandatory from | Qualifying income over | Income year HMRC checks |
|---|---|---|---|
| 1 | 6 April 2026 | £50,000 | 2024/25 return |
| 2 | 6 April 2027 | £30,000 | 2025/26 return |
| 3 | 6 April 2028 | £20,000 | 2026/27 return |
So if your 2024/25 tax return shows qualifying income above £50,000, you're in the first wave and must use MTD for Income Tax from 6 April 2026. If you're below £50,000 then but above £30,000 on your 2025/26 return, you join from 6 April 2027, and so on.
HMRC has said it will review your Self Assessment return and check your qualifying income each tax year, then write to you before you're required to start.
Table of contents
- When does MTD for Income Tax start for eBay sellers?
- What counts as qualifying income for an eBay seller?
- Am I even trading, or just selling old stuff?
- Does eBay report my sales to HMRC?
- What will I actually have to do under MTD for Income Tax?
- Illustrative example: which wave does Dev fall into?
- Who is exempt from MTD for Income Tax?
- How should an eBay seller get ready now?
- Frequently asked questions
What counts as qualifying income for an eBay seller?
This is where eBay sellers trip up, so let's be precise.
Qualifying income is the total gross income you get in a tax year from self-employment and property. Gross means before you deduct any expenses. HMRC describes it as your income before you deduct expenses, also called your turnover.
For an eBay business, your qualifying income is broadly your total sales, not what's left after you've paid for stock, postage, eBay fees and packaging.
That distinction matters enormously. A seller with £60,000 of sales and a 15% net margin makes around £9,000 profit, but their qualifying income is the £60,000. On gross sales alone they're in the first wave from 6 April 2026, even though their profit is modest.
Income from employment (PAYE), partnership profits, dividends, pensions and savings does not count towards your qualifying income. Only your self-employment and property turnover does. If you sell on eBay and also let out a property, you add those two gross figures together.
Am I even trading, or just selling old stuff?
MTD for Income Tax only bites if you're trading and your income clears the relevant threshold. So step one is working out whether you're a trader at all.
Selling your own unwanted personal items, an old sofa, your kids' outgrown clothes, a phone you've upgraded from, generally isn't trading and isn't taxable. Buying or making things with the intention of selling them at a profit is trading.
There's a useful tax-free buffer for genuine traders. The trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income.
If your annual gross trading income is £1,000 or less, you may not have to tell HMRC at all. But if your gross trading income is more than £1,000, you must register for Self Assessment by 5 October following the end of the tax year, and report the income.
So the order of events is: first decide if you're trading, then check whether you're over £1,000 (Self Assessment), and only then worry about which MTD wave you fall into. If eBay is a genuine side hustle that's grown into a real business, our accounting support for eBay sellers is built around exactly this journey.
Does eBay report my sales to HMRC?
Yes, and this is why MTD readiness matters more than ever. eBay and other digital platforms now collect seller information and report it to HMRC.
Under the digital platform reporting rules, platforms gather data over a calendar year (1 January to 31 December) and report it to HMRC by the following 31 January. The report includes your details and your income from selling on the platform.
There's a small-seller carve-out. A platform won't report your details if, in a calendar year, you both make fewer than 30 sales of goods and receive less than 2,000 euros (about £1,700) for those sales. Both conditions have to be met. Clear either one and you can be reported.
Being reported is not the same as owing tax. HMRC is clear that a platform reporting your details does not automatically mean you owe tax. You owe Income Tax only if you're actually trading (or making a capital gain). But it does mean HMRC can see your eBay activity, so the days of assuming online sales fly under the radar are over.
What will I actually have to do under MTD for Income Tax?
Once you're mandated, the once-a-year tax return is replaced by a digital, in-year rhythm. There are three moving parts.
1. Keep digital records. You record your self-employment and property income and expenses digitally, using software that's compatible with MTD for Income Tax. A shoebox of receipts and a spreadsheet you total up in January no longer cuts it.
2. Send quarterly updates. You send HMRC a cumulative summary of your income and expenses four times a year through your software. The standard quarterly periods and deadlines are fixed.
| Quarter covers | Standard deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April | 7 May |
Each update is cumulative from the start of the tax year, so a correction in a later quarter fixes the position without resubmitting earlier updates.
3. Submit your final tax return. After the tax year ends you finalise everything, claim reliefs and allowances, and submit your tax return through compatible software. The deadline is unchanged: by 31 January following the end of the relevant tax year. For the 2026/27 tax year, for example, that final submission is due by 31 January 2028.
Note that the quarterly updates are summaries, not four mini tax bills. Your tax is still calculated at the final stage, and your payment dates through Self Assessment are not changed by MTD itself.
Illustrative example: which wave does Dev fall into?
Illustrative example. Dev runs an eBay shop selling refurbished trainers as a sole trader. His numbers look like this.
| Tax year | Gross eBay sales (qualifying income) | Net profit |
|---|---|---|
| 2024/25 | £42,000 | £7,500 |
| 2025/26 | £55,000 | £9,800 |
| 2026/27 | £61,000 | £11,200 |
When HMRC checks his 2024/25 return for the first wave, Dev's qualifying income is £42,000. That's below £50,000, so he is not mandated from 6 April 2026.
For the second wave, HMRC looks at his 2025/26 return: £55,000 of gross sales. That's over the £30,000 threshold, so Dev must use MTD for Income Tax from 6 April 2027.
Notice what drives the result. Dev's profit never tops £11,200, but it's his gross sales of £55,000 that pull him into the 2027 wave. If he'd judged his start date by profit, he'd have got it wrong by a full year. From 6 April 2027 he keeps digital records, sends the four quarterly updates above, and files his final return for 2027/28 by 31 January 2029.
Who is exempt from MTD for Income Tax?
Some sellers are automatically exempt and don't need to do anything, while others have to apply.
You're automatically exempt if your qualifying income is £20,000 or less, since the rollout currently stops at the £20,000 tier from April 2028. You're also automatically exempt if you don't have a National Insurance number, if you're a personal representative dealing with a deceased person's affairs, or if power of attorney is in place and you can't provide the information yourself because of a disability. Trustees filing an SA900 and certain other specialist filers are outside the regime too.
Beyond those, you can apply for an exemption if you're digitally excluded, meaning it isn't reasonable for you to use compatible software because of your age, a disability, a health condition, your religious beliefs, or because you can't get reliable internet at home or your place of business.
HMRC has said it will not accept an exemption application based only on the fact that you've always filed on paper, that you find software unfamiliar, or that compliance has a cost. If you think you qualify, it's worth getting advice before assuming you're out.
How should an eBay seller get ready now?
You don't need to wait for HMRC's letter to start preparing. Work through these steps.
- Pin down your start date. Check the gross self-employment and property income on the relevant return: your 2024/25 return for the 2026 wave, 2025/26 for 2027, 2026/27 for 2028. Use sales, not profit.
- Separate trading from clear-outs. Make sure your eBay figures reflect genuine business sales, not personal items you've sold off.
- Get your records digital early. Move off the spreadsheet-and-receipts approach to MTD-compatible software well before your start date, so the first quarter isn't a scramble.
- Reconcile against your platform data. Because eBay reports to HMRC, your records and the platform's report should tell the same story.
- Plan the four quarterly deadlines (7 August, 7 November, 7 February and 7 May) into your year so they don't surprise you.
Doing this calmly over the months ahead beats reacting in a hurry. If you'd rather hand the whole thing over, our Self Assessment service covers MTD for Income Tax sign-up, software, quarterly updates and your final return, so you can keep your focus on selling.
Want a clear answer on which MTD wave your eBay shop falls into and what to do about it? Book a free 20-minute call with a Zmartly accountant and we'll map your start date and get your records ready.
Frequently asked questions
Is the MTD threshold based on my eBay profit or my total sales?
Total sales. Qualifying income is your gross self-employment and property income before expenses, also called turnover. So an eBay shop with high sales but a thin margin can be mandated even if its profit is small.
I sell on eBay below £20,000 a year. Do I have to use MTD for Income Tax?
No. The rollout currently goes down to qualifying income over £20,000 from 6 April 2028, and HMRC treats income of £20,000 or less as automatically exempt. You may still need to file a normal Self Assessment return if your gross trading income is over the £1,000 trading allowance.
Does eBay tell HMRC how much I've sold?
Yes. Digital platforms collect seller data each calendar year and report it to HMRC by the following 31 January, unless you both make fewer than 30 sales and receive less than about £1,700 (2,000 euros) in the year. Being reported does not automatically mean you owe tax.
Do quarterly updates replace my Self Assessment tax return?
Not exactly. You send four quarterly updates through software, then a final submission after the tax year ends that finalises your figures and claims your reliefs. That final return is still due by 31 January following the tax year.
When are the MTD quarterly update deadlines?
The standard deadlines are 7 August, 7 November, 7 February and 7 May, covering the periods ending 5 July, 5 October, 5 January and 5 April respectively. Each update is cumulative from the start of the tax year.
What happens if my eBay income drops below the threshold later?
HMRC checks your qualifying income each year using your Self Assessment returns. The detailed rules on staying in or leaving the regime depend on your circumstances, so it's worth confirming your position rather than assuming a single low year takes you out.
