HMRC's MTD Letter, Explained for eBay, Etsy & Amazon Sellers

If a letter from HMRC about Making Tax Digital for Income Tax has landed on your doormat, and you sell on eBay, Etsy, or Amazon, there's a detail in it that's easy to miss: the £50,000, £30,000, and £20,000 thresholds are based on your turnover, not your profit — and if you sell across more than one marketplace, HMRC adds your income from all of them together before checking which side of the line you're on.

What the letter actually means

Making Tax Digital (MTD) for Income Tax replaces the old Self Assessment return for most sole traders and landlords. Instead of one return a year, you keep digital records throughout the year, send HMRC a quarterly summary of income and expenses, and submit a final declaration at year end.

It's being phased in by income level:

From	If your qualifying income was over	Based on tax year
6 April 2026	£50,000	2024/25
6 April 2027	£30,000	2025/26
6 April 2028	£20,000	2026/27

HMRC checks the threshold against the Self Assessment return you already filed for the relevant year — it isn't a fresh calculation you have to do yourself. If you crossed £50,000 for 2024/25 and hadn't already signed up, HMRC has been auto-enrolling people into MTD this year. If your 2025/26 income lands over £30,000, expect a letter telling you to get ready for April 2027 instead (GOV.UK: find out if and when you need to use MTD for Income Tax).

"Qualifying income" is your gross sales, not what you took home

This is the part that catches marketplace sellers out. HMRC defines qualifying income as gross turnover from self-employment and property — the total money in, before you deduct stock, postage, or platform fees (GOV.UK: work out your qualifying income).

That matters because reselling margins are thin. A seller who nets £18,000 in profit might easily be sitting on £45,000–£60,000 in gross sales once postage and item cost are stripped back out — comfortably over the £50,000 line, even though the actual take-home is a fraction of that.

Sell on more than one platform? HMRC adds them up

If you run one shop, working out your qualifying income is a single number. If you sell across eBay, Etsy, and Amazon at once, it isn't three separate checks — it's one combined figure, because it's all the same self-employment income for tax purposes.

For example:

Channel	Gross sales
eBay	£22,000
Etsy	£14,500
Amazon	£15,000
Combined qualifying income	£51,500

None of those three numbers looks alarming on its own. Added together, this seller is over the £50,000 threshold and should already be filing under MTD for Income Tax. Sellers who watch each marketplace's dashboard separately are the ones most likely to miss this, because no single platform shows them the number HMRC is actually using.

HMRC already has your marketplace data — separately from this

There's a second reason marketplace sellers specifically need clean records, and it predates MTD. Since 2024, eBay, Etsy, and Amazon have been required to report UK seller data to HMRC once you pass a low threshold (roughly 30 items or about £1,700 in a year), under the OECD's DAC7 rules. HMRC already receives your gross sales figures directly from the platforms, independent of anything you file yourself.

MTD for Income Tax and DAC7 reporting are different systems, but they land in the same place: HMRC holds numbers from your marketplaces, and it expects your own records to be consistent with them. Quarterly digital updates that don't reconcile to what eBay, Etsy, or Amazon already reported are exactly the kind of mismatch that invites a follow-up letter. We've covered the DAC7 side in more detail in eBay HMRC reporting: what UK sellers need to know.

What to actually do about the letter

1. Add up your gross sales across every marketplace you sell on for the relevant tax year — not just the one the letter mentions.
2. Check which wave you're in. Over £50,000 for 2024/25 means you should be in MTD now; over £30,000 for 2025/26 means April 2027; over £20,000 for 2026/27 means April 2028.
3. Use MTD-recognised software. You can no longer file through HMRC's website or on paper once you're in — it has to go through compatible software such as FreeAgent.
4. Get your records to transaction level before your first quarter starts. Quarterly updates are only accurate if every sale, fee, postage cost, and refund is recorded individually rather than netted off in a single payout figure — see how to record eBay sales in FreeAgent the right way.

How TransactionMerge helps

The hardest part of MTD for a multi-marketplace seller isn't the quarterly filing itself — it's getting eBay, Etsy, and Amazon transactions into one clean, reconciled set of records that a quarterly update can actually be built from.

TransactionMerge connects your marketplaces to FreeAgent and keeps them in sync automatically. Every sale becomes an invoice, every fee and postage cost becomes a bill, every refund becomes a credit note, and payouts reconcile against the right transactions — so your FreeAgent data matches what HMRC already has from your marketplaces, and your quarterly updates are an export, not a reconstruction project.

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This post explains our understanding of Making Tax Digital rules as they stand for UK sole traders selling on eBay, Etsy, and Amazon. It isn't personal tax advice — if you're unsure how the rules apply to your situation, check GOV.UK's MTD for Income Tax guidance or speak to an accountant.