Making Tax Digital for Etsy and eBay Sellers: Do You Actually Need to Worry?

A decade or so ago I found myself out of work with two young kids to look after, doing everything I could as a single parent to make it work. While I was hunting for good deals on things I needed, I started using eBay to find better prices than anywhere else — and somewhere along the way I flipped from buyer to seller. It started tiny: a few niche items I'd needed myself and couldn't find anywhere else, packed so small that I used to go to the bank for free coin bags just to post them out. It was never really a plan, more of a happy accident, but it grew into a proper little income stream, and a few years later I registered as self-employed. I've always liked keeping on top of things, so I did it properly from the start — annual tax return, decent records, nothing complicated. It became what I'd call a genuine lifestyle business: never going to make me rich, but something that fit around family and, eventually, another job too.

That simple routine is exactly what Making Tax Digital changes, and I'll be honest about my first reaction when I heard about it: "oh what now, more tax." I'm not sure that's entirely fair, but there's no getting away from the fact that more is being asked of small sellers now, and that's only going to continue. Every platform now reports seller activity to HMRC, so if things aren't being done properly, that activity is visible. I've lost count of the number of people who've told me "oh it's only a bit of stuff that I sell" — and some of them, once you actually add up Facebook Marketplace, Etsy, eBay, Vinted, and Amazon together, are well over the £1,000 trading allowance without realising it, because it's one combined total across every platform, not a fresh allowance on each one. My honest opinion, as someone who's been a small seller myself the whole way through: sort your position out properly now. The alternative — carrying on and hoping it doesn't catch up with you — is a genuinely worse position to be in than just dealing with it.

The two rules people mix up

1. Digital platform reporting (affects far more people, much lower bar). Since new rules took effect, platforms including Etsy, eBay, Vinted, and Depop must report seller information directly to HMRC once a seller crosses certain activity levels — 30 or more sales in a calendar year, or total sales over roughly £1,700 (€2,000), whichever comes first. This reporting happens automatically; you don't need to be "trading" in HMRC's formal sense for the platform to report your activity. Being reported doesn't automatically mean you owe tax — it just means HMRC has visibility of your sales data to cross-check against what you declare.

2. The £1,000 trading allowance (this is what actually determines if you owe tax). If your gross trading income — total sales, before deducting any costs — stays at £1,000 or less in a tax year, the trading allowance covers it and you generally don't need to declare it. Cross £1,000 and you may need to register for Self Assessment, even if your actual profit after costs is small.

3. Making Tax Digital for Income Tax (this page's actual subject, and a much higher bar again). MTD only applies once your combined self-employment and property income crosses £50,000 (from 2026), then £30,000 (2027), then £20,000 (2028). The vast majority of Etsy and eBay sellers are nowhere near this — but a genuinely established shop, especially combined with other self-employment or rental income, can be.

Are you even "trading"?

This is the question that causes the most anxiety, and it has a real answer. Selling your own old clothes, furniture, or unwanted gifts — items you originally bought for yourself — generally isn't trading, however often you do it, because you're not buying with the intention of resale. What tips you into trading, in HMRC's view, comes down to a handful of practical questions:

• Are you buying or making items specifically to resell, rather than clearing out your own possessions?
• Are sales frequent and repeated, rather than occasional decluttering?
• Do you operate with the kind of organisation associated with a business — a dedicated shop front, stock levels, marketing?

If the answer to these is broadly yes, you're trading, and the £1,000 allowance (not a blanket exemption) is what determines whether you need to declare anything.

A change worth knowing about ahead of time: from the 2027/28 tax year, HMRC is raising the registration/reporting threshold to £3,000 as part of a simplified service for casual sellers — but the underlying £1,000 trading allowance itself isn't changing. For now, for the 2025/26 and 2026/27 tax years, the existing £1,000 threshold still applies. Worth checking gov.uk for the confirmed implementation date closer to the time, since full details weren't finalised at time of writing.

What to actually do, depending on your situation

• Occasional seller, clearing out your own things: not trading, no action needed. Worth keeping basic records (screenshots, sale prices) in case HMRC asks, but nothing to declare.
• Trading, but gross income under £1,000/year: covered by the trading allowance. No need to register or declare, though you can still choose to file if it benefits you (e.g. to claim a loss).
• Trading, gross income over £1,000/year: you likely need to register for Self Assessment. The deadline to register is 5 October following the end of the tax year in which you first went over the threshold.
• Trading at real scale — approaching or over £20,000–£50,000 in combined qualifying income: this is where MTD itself comes in. Check your exact MTD start date with our free calculator →

Record-keeping for sellers

Whether or not you're above the trading allowance, the same habits make life easier if HMRC does ask questions:

• Keep platform sales reports (Etsy and eBay both let you export these) rather than relying on memory.
• Track your costs separately — materials, postage, platform and payment processing fees, packaging — since these are what turn gross sales into actual profit.
• If you're VAT-registered separately from this, note that platforms may already collect VAT on certain fees or import scenarios — that's a distinct issue from your own Income Tax position.