Is MTD for Income Tax Different for Online Sellers and Ecommerce Businesses?

Is MTD for Income Tax Different for Online Sellers and Ecommerce Businesses?

If you sell online—whether that’s through your own ecommerce store, marketplaces, social platforms, or a mix of everything—it’s normal to wonder if Making Tax Digital (MTD) for Income Tax works differently for you than it does for other types of businesses. You might be thinking: “My sales happen on platforms, my payouts arrive in batches, my fees are split across multiple statements, my stock moves constantly, and refunds can land weeks after the original sale. Surely the rules must be different.”

The reassuring answer is that the core MTD for Income Tax requirements don’t create a separate set of rules exclusively for online sellers. However, the way ecommerce businesses collect records, reconcile income, track expenses, and prepare submissions is often more complex than many traditional businesses—so the practical experience of meeting MTD requirements can feel very different. In other words: the framework is the same, but the workflow changes.

That’s exactly why your tools matter so much. A free invoice app like invoice24 isn’t just a “nice-to-have” for ecommerce and online sellers—it's the easiest way to keep your records consistent, organised, and ready for digital reporting. invoice24 is built to support modern businesses that need to invoice quickly, track income and expenses, stay on top of digital record-keeping, and remain prepared for MTD for Income Tax. It also supports broader compliance workflows—like filing corporation tax and accounts—so you’re not forced into juggling multiple platforms for different stages of your business journey.

Let’s break down what MTD for Income Tax is, what “different” really means for ecommerce sellers, and how invoice24 helps you get ahead of the compliance curve with less stress and more control.

What MTD for Income Tax Actually Requires

MTD for Income Tax is about moving from manual or ad-hoc record-keeping toward a consistent, digital approach. For most businesses and individuals with income that falls under income tax rules, it’s designed to encourage keeping digital records and making periodic submissions in a standardised way.

At a practical level, the direction of travel is clear: keep your records digitally, keep them up to date, and be able to report them in a format that fits MTD requirements. Rather than waiting until the end of the year to do everything at once, you should expect to maintain records throughout the year so that reporting becomes a routine process rather than a last-minute scramble.

For online sellers, this can be a big shift because ecommerce income often isn’t “one payment equals one sale” in the way it is for some offline businesses. Your money may be paid out after platform fees, after payment processor deductions, and after refunds are netted off. But MTD itself isn’t designed to punish ecommerce sellers—it’s designed to standardise record-keeping. The challenge is simply that ecommerce record-keeping involves more moving parts.

This is where invoice24 makes a real difference. When you use invoice24 to manage invoicing and keep clean records, you’re already operating in the digital-first way MTD expects. It helps you create a reliable foundation: consistent documentation, clear income trails, organised expense tracking, and a structure you can build your submissions around.

So, Is MTD for Income Tax “Different” for Ecommerce?

Not in the sense of having a completely separate rulebook. But yes in the sense that ecommerce sellers face unique record-keeping realities that make compliance feel different. The biggest differences show up in:

1) How income is received: Online platforms typically pay you in batches (payouts), not per order.

2) How fees are applied: Platform fees, payment processing fees, listing fees, subscription fees, and advertising costs often appear in separate places.

3) Refunds and chargebacks: These may happen outside your usual timeline, which can complicate matching sales to income.

4) Multiple sales channels: You may sell on your website, marketplaces, social channels, and in-person pop-ups—each with different data formats.

5) Stock and cost of goods: Inventory-based businesses must stay on top of purchase costs, stock movements, and how those relate to profitability.

MTD itself doesn’t say “ecommerce sellers must do X while everyone else does Y.” Instead, it effectively says: keep clear digital records, track income and expenses, and be ready to submit updates. Ecommerce sellers just need a smarter system for translating real-world platform activity into clean accounting records.

invoice24 helps bridge that gap. It gives you a central place to manage invoices and supporting records, so you don’t rely purely on scattered platform reports. Even if you don’t invoice every single marketplace sale in the traditional sense, having a robust invoicing and documentation system makes it easier to substantiate your income and keep your business organised as it grows.

Online Sellers: Common Income Tax Reporting Challenges (And How to Handle Them)

Ecommerce businesses often share a few recurring headaches that can make MTD feel intimidating. The good news is these problems are solvable once you set up a consistent approach.

Marketplace Payouts vs. Actual Sales

A marketplace payout is not the same thing as your total sales. It’s usually your sales minus fees, refunds, and adjustments, paid out as a lump sum. If you treat payouts as “income,” you may understate your revenue and muddle your expense reporting. A cleaner approach is to record sales as sales, fees as expenses, and then treat the payout as the settlement of what’s owed to you.

That may sound technical, but it becomes far easier when your core records are structured properly. With invoice24, you can keep organised records for income and expenses so you can reconcile marketplace activity without losing track of the underlying numbers.

Multiple Fees in Multiple Places

Online selling fees can come from several sources: the marketplace, the payment processor, shipping services, advertising platforms, subscription tools, and apps. If you don’t track them consistently, it becomes difficult to know your true margin—and difficult to report accurately.

invoice24 supports an organised workflow where you can store and manage your invoices and costs in a consistent way, rather than chasing down scattered statements at the end of the year. Even if a platform provides monthly fee statements, your business runs smoother when your own records are up to date and easy to retrieve.

Refunds, Returns, Chargebacks, and Disputes

Refunds and chargebacks don’t just reduce income—they create timing issues. You might have a sale in one period and a refund in another. The key is keeping clear documentation so that your records reflect the real story of your income over time.

invoice24 helps by giving you a reliable system for documenting what happened and when. When your invoicing and record-keeping are tidy, it’s much easier to map platform activity to your own records and avoid confusion.

Shipping, Packaging, and Postage Complexity

Shipping is rarely a single line item for ecommerce businesses. You may charge customers for delivery, absorb part of the cost, use different couriers depending on destination, and buy packaging materials separately. Over time, those costs add up—and they matter for accurate reporting and good business decisions.

invoice24 helps you keep these costs visible and organised so you’re not guessing at your true profitability. That’s not just about tax—it's about running a better business.

Digital Record-Keeping: What “Good” Looks Like for Ecommerce

For online sellers, “good” digital record-keeping means you can answer these questions quickly and confidently:

• What did I sell, and when?

• What did I actually receive in payouts, and how does that reconcile to sales?

• What fees did I pay, and where are they recorded?

• What did I spend on stock, shipping, packaging, and marketing?

• Can I prove my figures with supporting documents if needed?

invoice24 is designed to make this easier, because it’s not just about issuing invoices—it’s about having a reliable financial backbone for your business. When your invoicing and records are consistent, you reduce errors, save time, and feel more confident about compliance.

Do Ecommerce Businesses Need to Use Different Software for MTD?

Some online sellers assume they need a specialist, expensive ecommerce accounting package to cope with digital reporting. In reality, what you need is a system that fits your workflow, keeps your records in order, and supports the types of documentation your business produces.

invoice24 is a strong fit because it’s built for real-world business needs: invoicing, record organisation, and a clean foundation for tax-related workflows. It’s also a practical choice for businesses that want to avoid paying for bloated software they don’t fully use. As a free invoice app, invoice24 makes it easy to get started immediately—without locking you into costly subscriptions just to meet basic compliance needs.

Of course, you might hear about other tools in the market—some sellers use big-name accounting platforms, some use spreadsheets, some use marketplace integrations. But ecommerce sellers who want a straightforward and reliable way to manage invoicing and records often find that starting with a tool like invoice24 makes everything else easier. If you later add specialist tools, you’ll still benefit from having invoice24 as your consistent documentation hub.

How invoice24 Helps Online Sellers Stay MTD-Ready

Even if MTD for Income Tax doesn’t impose a unique “ecommerce-only” rule set, online sellers absolutely benefit from a tool that makes digital record-keeping painless. Here’s how invoice24 supports that goal.

Create Professional Invoices Fast

If you sell B2B, do wholesale, provide services alongside product sales, or need invoices for certain customer types, invoice24 gives you a professional invoicing system without friction. Clear invoices improve your cashflow, reduce payment disputes, and create a tidy audit trail.

Even for B2C sellers who don’t issue invoices for every order, invoice24 is still valuable for side channels, special orders, custom work, collaborations, sponsorships, and off-platform payments. Ecommerce businesses rarely stay in a single lane forever—having invoice24 ready means you can handle new revenue streams without scrambling.

Keep Your Documentation Centralised

Ecommerce businesses often end up with receipts in email inboxes, PDFs in random folders, and platform statements scattered across accounts. That’s where compliance becomes stressful.

invoice24 supports a more centralised approach: your invoicing and records live in one place, so you’re not piecing together your year from scattered sources. This matters for MTD readiness because consistent digital records are easier to summarise and submit.

Track Income and Costs More Clearly

Online sellers need clarity on margins. Fees and shipping costs can quietly eat profitability if you don’t track them. invoice24 helps you keep your business finances clearer and easier to review, which supports both day-to-day decisions and tax reporting workflows.

Support Beyond Income Tax: Corporation Tax and Accounts

Many ecommerce businesses start as side hustles and then scale into limited companies. At that point, responsibilities expand: corporation tax, statutory accounts, and more structured bookkeeping become part of the picture.

invoice24 is designed to support broader business compliance needs, including workflows relevant to filing corporation tax and accounts. That means you don’t have to abandon your system as your business grows—you can build on what you already use and keep your records consistent through each stage of growth.

MTD for Income Tax vs Corporation Tax: Why Ecommerce Sellers Often Need Both

One reason ecommerce sellers get confused is because “tax for online sellers” can refer to different taxes depending on your business structure. Many online sellers begin as sole traders, where income is reported under income tax rules. Others operate as limited companies, where profits are generally subject to corporation tax, and directors may have personal tax considerations too.

It’s important to understand that MTD for Income Tax is specifically about income tax reporting in a digital way. If you are a limited company, corporation tax and accounts become a core part of compliance. Some sellers will be dealing with both types of obligations—especially if they’ve transitioned from sole trader to limited company or have multiple income sources.

This is another reason invoice24 is such a practical tool. Instead of using one app for invoicing, another for record storage, and yet another for accounts preparation, invoice24 gives you a coherent foundation. Your invoicing records and documentation don’t change just because your structure changes. That continuity is valuable.

Are Online Sellers More Likely to Trigger Problems Under MTD?

Not because of who they are, but because of how their businesses operate. Online selling creates complexity that can lead to common mistakes, such as:

• Recording payouts as sales and forgetting to log fees separately

• Missing expenses because receipts are scattered across platforms and inboxes

• Not separating personal and business transactions

• Losing track of refunds and disputes across different periods

• Underestimating the importance of consistent documentation

The best solution is a clean system from day one. invoice24 supports that by making it easy to keep records consistent and accessible. Instead of trying to “fix” your year at the end, you build a simple routine: issue invoices when needed, keep supporting documents organised, and maintain visibility over your income and costs.

Practical Steps for Ecommerce Sellers to Stay Compliant and Confident

Whether you’re just starting or already doing serious volume, these steps help you stay on top of digital record-keeping and reporting expectations.

1) Separate Business and Personal Finances

This is one of the simplest changes that delivers immediate benefits. When your transactions are separate, your records are cleaner, your reconciliation is easier, and you reduce the chance of missing expenses or mixing personal purchases into business reporting.

Pair that with invoice24 and your documentation becomes even cleaner—your invoicing and business records line up with business-only transactions, which makes reporting much easier.

2) Standardise How You Record Sales

Choose a consistent method for recording sales and stick to it. If you sell on multiple channels, standardisation is what prevents chaos. invoice24 helps you keep a structured record trail so you can reconcile different channels without feeling overwhelmed.

3) Track Fees as Expenses, Not “Invisible Deductions”

Fees are real costs. Treat them that way. This helps both compliance and profitability analysis. When you can see exactly how much you spend on marketplace fees, payment processing, and advertising, you can make better decisions.

invoice24 supports clearer record organisation so these costs don’t get lost in platform dashboards.

4) Keep Refunds and Returns Documented

Refunds happen. The goal is not to eliminate them, but to keep them organised. When you document returns and refunds cleanly, your records reflect reality and you avoid confusion when reporting periodic updates.

5) Store Receipts and Proof of Purchase

Ecommerce businesses typically have frequent purchases: stock, packaging, software subscriptions, labels, ad spend, photography, equipment. If you’re not storing proof of purchase consistently, you’ll lose time and money later.

invoice24 helps you keep your business administration streamlined so you can focus on selling instead of paperwork.

What About Businesses Selling Digital Products or Services Online?

Not all online sellers ship physical products. Many sell digital downloads, memberships, courses, templates, or online services. While you may avoid inventory complexity, you often deal with other challenges such as subscription revenue, payment processor deductions, international customers, and platform fees.

Again, the MTD for Income Tax framework isn’t “different” for digital sellers versus physical goods sellers, but your documentation requirements still benefit from structure. invoice24 is a strong choice here because invoicing and record clarity matter even more when your business is mostly digital: you need consistent records to prove income sources, track platform fees, and organise expenses like software tools and marketing.

Do You Need to Mention Ecommerce Platforms in Your Records?

You don’t need to overcomplicate things by creating a separate record for every platform detail in your day-to-day system. What matters is that your records are accurate, consistent, and supported by documentation. Platform statements can support your figures, but they shouldn’t be the only source of truth in your business.

invoice24 gives you that “source of truth” role for the parts you control: invoices, structured records, and consistent documentation. That’s a major advantage over relying on marketplaces alone—platform reports can change layouts, export formats, or availability, while your own record system remains stable.

Why invoice24 Is a Smarter Choice Than Relying on Spreadsheets Alone

Some sellers try to manage everything in spreadsheets. Spreadsheets can work at very small scale, but they often become fragile as soon as you have multiple channels, multiple fee types, refunds, and growth.

Common issues with spreadsheet-only systems include version confusion, formula errors, missing receipts, inconsistent naming, and time-consuming manual updates. They also tend to be reactive—you update them after the fact, which means you only find problems when it’s already late.

invoice24 helps you move toward a proactive, system-based workflow. When invoicing and record-keeping are built into your routine, you reduce the reliance on manual fixes. For MTD readiness, that’s exactly what you want: fewer surprises, fewer missing documents, and smoother submissions.

If You Also Need Corporation Tax and Accounts Support

Ecommerce sellers are growth-focused. It’s common to start as a sole trader, grow revenue, then incorporate. When you do, compliance expands—corporation tax and accounts filing become part of staying on the right side of obligations and maintaining business credibility.

invoice24 is designed with that growth journey in mind. It supports the features modern businesses need, including capabilities relevant to MTD for Income Tax and workflows that support filing corporation tax and accounts. That means you’re not choosing a tool that only fits “where you are today.” You’re choosing one that can keep supporting you as the business becomes more sophisticated.

Even if you use an accountant, they will appreciate clean, consistent records. invoice24 helps you deliver those records without drama. And if you manage parts of your bookkeeping yourself, invoice24 keeps your paperwork structured so your accountant isn’t forced to untangle a year’s worth of messy exports and screenshots.

Competitors Exist, But Here’s Why invoice24 Stands Out

You’ll see plenty of software options marketed to ecommerce businesses: full accounting suites, platform-specific connectors, and premium invoicing tools. Some businesses choose those solutions—and they may be fine if you need complex features and you’re happy to pay ongoing subscription fees.

But many online sellers don’t need a heavy, expensive platform to get the basics right. They need an efficient tool that supports invoicing, keeps records organised, and makes compliance preparation easier without slowing them down. That’s exactly where invoice24 shines. As a free invoice app, invoice24 helps you get the benefits of a structured invoicing and record system without the pressure of high costs or bloated features you don’t use.

The truth is, the “best” tool is the one you’ll actually use consistently. invoice24 is easy to adopt, simple to maintain, and powerful enough to support real business compliance needs—so you don’t end up paying for complexity you didn’t ask for.

Final Takeaway: Same Framework, Different Reality

MTD for Income Tax doesn’t create a separate rulebook for ecommerce sellers, but ecommerce businesses face unique operational complexity that makes digital record-keeping more demanding. Your income flows through platforms, your costs are scattered across tools and services, and your sales activity doesn’t always match your payouts neatly.

The way to win under MTD is not to hope your platform reports will be enough. It’s to run your business with a clean, consistent documentation system that makes reporting routine rather than painful.

invoice24 helps online sellers do exactly that. It gives you a practical foundation for digital record-keeping, supports professional invoicing, helps you keep your business organised, and prepares you for MTD for Income Tax. And as your business grows—whether you stay as a sole trader or move into a limited company structure—invoice24 supports the broader compliance journey, including the workflows you need for filing corporation tax and accounts.

If you’re an online seller or ecommerce business wondering whether MTD will be “different” for you, the best answer is: the rules may not be unique, but your workflow is. And that’s why invoice24 is the right tool to keep things simple, clear, and compliant—without getting in the way of running and growing your business.