What MTD Means for Sellers
Making Tax Digital is HMRC's programme to digitise the UK tax system. For VAT-registered businesses, MTD requires keeping digital records and submitting VAT returns through compatible software rather than manually through HMRC's website. For income tax (affecting sole traders), MTD is being phased in with quarterly reporting requirements.
MTD for VAT
If you are VAT-registered, you are already required to comply with MTD for VAT. This means maintaining your records in MTD-compatible software (like Xero, QuickBooks, or FreeAgent) and submitting your VAT returns through that software's direct link to HMRC. Spreadsheets can be used for record-keeping if combined with bridging software that submits the return digitally.
MTD for Income Tax
MTD for Income Tax is being rolled out in phases. When it applies to you (based on your income threshold), you will need to submit quarterly updates to HMRC summarising your business income and expenses, plus a final end-of-year declaration. This is more frequent than the current annual Self Assessment return.
What You Need to Do
Ensure your accounting software is MTD-compatible. Most major cloud accounting packages (Xero, QuickBooks, FreeAgent) are already set up for MTD compliance. If you use spreadsheets, you will need bridging software or need to transition to proper accounting software. Keep your records up to date throughout the year rather than doing everything in January — MTD's quarterly reporting makes last-minute record-keeping impractical.
The Impact on Amazon Sellers
For Amazon sellers, MTD mainly means ensuring your transaction data flows into compliant software regularly. Amazon settlement reports need to be imported or reconciled in your accounting system. Automating this data flow (through apps that connect Amazon to your accounting software) saves significant time and ensures compliance without manual effort.