eBay side hustlers be warned: Managing Director of Leeds-based accountancy firm urges prolific online marketplace sellers to register for MTD to avoid fines under new Making Tax Digital rules
As HMRC’s long-heralded Making Tax Digital scheme gets underway, one Leeds-based accountancy firm is urging prolific eBay sellers to register for MTD or face fines
As of 6th April 2026, the UK’s tax system underwent a momentous change with very little fanfare. Making Tax Digital (MTD) – a scheme designed to modernise the way we file taxes – became mandatory for sole traders and landlords whose turnover meets HMRC’s thresholds (currently >£50,000). For UK online sellers, this marks a major shift in incoming reporting: failure to maintain digital records or file quarterly returns via compatible software can lead to penalties. Yet thousands of eBay shop owners are still unaware of upcoming and past deadlines.
Jonathan Myers, Managing Director of UWM Accountants, is urging full-time eBay sellers to register for MTD before further deadlines roll around and penalties become harsher.
“Even if you have been slow to prepare for Making Tax Digital under the new income tax rules, there is still time to get organised before penalties become a bigger issue. The points-based system also gives taxpayers more opportunity to correct mistakes early,” he says
What Changes Does MTD Bring in Its Wake for eBay Sellers?
This first mandatory phase of Making Tax Digital for Income Tax Self Assessment (MTD ITSA) has completely changed how self-employed people, side hustlers, online sellers, and landlords report income to HMRC.
Instead of filing one annual Self Assessment return with old school, paper-style bookkeeping, affected taxpayers must now:
- Keep digital records
- Use MTD-compatible software
- Submit quarterly updates to HMRC
- Submit a final year-end declaration
HMRC assert that this regulatory update will improve accuracy and streamline financial operations, thereby reaping significant time savings. However, many taxpayers are woefully underprepared – 94% of British businesses self-reporting that they still don’t feel ready.
Jonathan Myers says, “The upside is that there is no new ‘side hustler’ or ‘eBay tax’ as I’ve seen some outlets fearmongering, just a shakeup in reporting and record-keeping.
That said, it’s causing a huge stir in the small business community. Many of the full-time online sellers I’ve spoken with admit to feeling in the dark and overwhelmed by the process”.
Who Needs to Register for MTD?
For eBay sellers, the key question is whether HMRC sees the activity as a trade (business activity) or simply selling the odd personal possession for a bit of extra cash.
You must join MTD ITSA if all of the following apply:
- You are a sole trader and/or landlord
- You are registered for Self Assessment
- Your qualifying income exceeds the HMRC threshold
- You carry out trading activity through platforms, like eBay or similar online marketplaces, and your qualifying self-employment and property income exceeds the £1,000 Trading Allowance.
MTD Thresholds You Need to Know as an eBay Seller
Fortunately, the slow creep of MTD means that only those eBay sellers who meet the thresholds must take prompt action. Do note, however, that these milestones come with a handful of caveats.
Income Tax Self Assessment (ITSA)
The first MTD thresholds you need to be aware of relate to income tax self assessment. Here, if your gross self-employment and property income exceeds £50,000 for the 24/25 tax year, you are mandated to enrol and participate in the scheme.
The following deadlines are fixed in law, so best practice will have you check their corresponding thresholds at the end of each fiscal year.
- Phase 1) 6th April 2026: Qualifying income over £50,000 in 2024 to 2025.
- Phase 2) 6th April 2027: Qualifying income over £30,000 in 2025 to 2026.
- Phase 3) 6th April 2028: Qualifying income over £20,000 in 2026 to 2027.
Many people think “I only need to worry if I make a profit”, but this is a misconception. Because qualifying income covers all self-employed and UK property income, even casual eBay sellers may surpass the threshold.
For example, if a landlord earned gross rental income of £45,000 and then £6,000 of taxable self-employment income from online selling activities, they’d have to begin reporting to HMRC using MTD-compliant software.
VAT
All VAT-registered businesses should already be signed up for Making Tax Digital. Nonetheless, some eBay sellers may teeter on the edge of the threshold, necessitating registration.
If your VAT-taxable turnover exceeds the £90,000 VAT registration threshold, you may need to register for VAT and comply with Making Tax Digital for VAT requirements
What Do You Do if You Miss a Deadline?
You cannot outrun MTD; however, you can adapt to it. If you suspect you have missed the deadline for applying, it’s important you take swift action to avoid accruing unnecessary penalties, even if you haven’t received a ‘brown letter’ from HMRC.
Without panicking, double-check your records and compare them against the thresholds of the relevant deadline. If you believe you have missed a deadline, immediately review your position, bring your records up to date and deal with any overdue submissions or tax liabilities as quickly as possible.
Fortunately, penalties work on a sliding scale, so the quicker your response, the fewer the consequences.
It is also worthwhile pointing out that there are several markers of ‘digital exclusion’, which make taxpayers exempt either permanently or temporarily. They include unreliable internet, religious objection to electronic communications or a disability that prevents record keeping. To get the ball rolling and apply for an exemption, you need to call or write to HMRC.
Navigating Penalties
While HMRC’s new points-based penalty system may sound intimidating, it is arguably more forgiving than the old regime. Instead of an automatic fine for a single missed submission, taxpayers now accumulate penalty points for each missed quarterly update or payment deadline. Once you reach the relevant penalty threshold for their submission frequency, a £200 penalty is issued, with further penalties for continued non-compliance.
Jonathan Myers explains, “The important thing is not to ignore the problem. HMRC is being stricter about digital compliance, but they are also giving taxpayers opportunities to correct mistakes before the most severe penalties kick in. The early bird catches the worm, as they say.”
All the same, it’s unwise to think that you can wriggle out of these new requirements by putting them on the back burner. Under new legislation, all digital platforms and online marketplaces – eBay and Etsy to Uber and Deliveroo – are legally obliged to track and automatically share your sales data with HMRC, so they will see any discrepancies.
For eBay sales, your earnings will be reported as soon as you complete 30+ sales transactions or you generate more than €2,000 (roughly £1,750) in gross revenue in a tax year.
Interest may also accrue on overdue tax payments, so sellers should aim to keep accurate records and respond promptly to HMRC communications.
How to Stay Compliant
For eBay sellers newly entering the world of digital tax reporting, the process can feel daunting. UWM Accountants outline the following steps eBay sellers can use to stay on top of MTD.
To avoid trouble with HMRC, they should:
- Register for MTD well before the relevant deadline
- Explore numerous avenues for MTD-compatible accounting software
- Be strict about keeping digital records of sales, expenses and invoices
- Always aim to submit quarterly updates on time
- Monitor turnover continually to check whether VAT registration thresholds are approaching
Support is out there, if you know where to look
For many eBay business owners and hobbyist sellers, tax can still feel like a minefield. The good news, though, is that there is a growing network of support available to help people adapt to the new rules.
HMRC provides free guidance online covering MTD registration, filing requirements, exemptions, and compatible software. There are also webinars and video tutorials aimed at helping sole traders understand their obligations.
Beyond official resources, accountants and specialist advisers can help sellers determine whether they actually qualify for MTD and set them up for long-term compliance by helping establish systems that save time and, more importantly, stress. For those juggling online selling alongside a full-time job, professional advice may provide peace of mind as reporting requirements become more complex.
As Making Tax Digital continues its phased rollout, one thing is becoming clear: whether you are running a full-scale eBay business or simply generating substantial income through online selling, staying informed and organised will be essential to avoiding unnecessary penalties in the years ahead.
Disclaimer: This article is for general informational purposes only and does not constitute financial, tax, or legal advice. While the information is believed to be accurate at the time of publication, HMRC rules and regulations may change. Readers should seek professional advice regarding their individual tax circumstances and Making Tax Digital obligations.