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Making Tax Digital (MTD) isn’t just a buzzword anymore; it’s the reality of how modern businesses communicate with HMRC. If you are selling on TikTok Shop, Amazon, or Shopify, the days of throwing receipts into a shoebox and handing them over once a year are long gone.
However, despite the publicity, we still see sellers getting it wrong. The rules for MTD for Income Tax (MTD ITSA) are specific, and failing to adhere to them doesn't just mean a slap on the wrist—it can trigger full-blown HMRC inquiries.
As an ecommerce accountant UK brands trust to handle high-volume transactions, I’ve seen where the cracks appear. It’s rarely intentional tax evasion; it’s usually a misunderstanding of what "digital" actually means.
Here is a breakdown of the five most common mistakes online sellers make, and how to keep your business safe.
(Why manual data entry is now illegal between software)
This is the number one technical foul we see. Many sellers believe that as long as they submit the figures online, they are "digital."
MTD requires "digital links." This means data must flow from your source (e.g., your bank or sales platform) to your final return without manual intervention. You cannot calculate your sales on a spreadsheet, write the total on a post-it note, and then type that figure into HMRC’s portal. That breaks the digital chain.
Here is where it gets tricky for our clients who are influencers or affiliates. The integration software for creators and affiliates doesn't really exist yet.
Unlike Shopify or Amazon, which have robust APIs that plug straight into Xero, TikTok Affiliate dashboards and many influencer platforms are notoriously difficult to automate.
What this means for you: If you are downloading CSVs from an affiliate platform, you must import them into your accounting software. If you use a spreadsheet to bridge the gap, the cells must be linked via formulas. You cannot copy and paste values between different sheets or software. If you are unsure if your process is compliant, you need to check this immediately.
(Clarifying that reporting ≠ paying)
When sellers hear they have to report quarterly under MTD, the immediate panic is: "I can’t afford to pay my tax bill four times a year!"
Let’s clear this up:
Under the current MTD rules, the requirement is to provide updates, not payments. You are giving HMRC a running commentary on your business performance. This is designed to prevent the shock of a massive tax bill 18 months after you earned the money, but it does not force you to pay immediately upon submission.
Do I have to pay tax quarterly under MTD? No. MTD for Income Tax currently requires quarterly reporting of data, but your tax payment deadlines generally remain 31st January (and 31st July for payments on account).
When you are scaling a D2C brand or just starting out on TikTok Shop, the lines often blur. You might use your personal Monzo card to buy lighting equipment, or use the business account to grab a coffee.
Under MTD, because data is submitted more frequently, these discrepancies become obvious much faster. If HMRC sees a feed of "business expenses" that includes Netflix subscriptions or groceries, their automated systems may flag your account for "duality of purpose"—meaning the expense wasn't wholly and exclusively for trade.
The Fix:
(Gross income vs. Net profit confusion)
There is massive confusion regarding who MTD applies to. The threshold (initially set for those earning over £50,000) is based on Gross Qualifying Income, not Net Profit.
Example:
Many sellers think, "My profit is only £15k, so I don't need to worry about MTD."
Wrong. Your qualifying income is £60,000. You are over the threshold.
Important Note: This threshold also aggregates your income. If you have £40,000 sales from Shopify and £12,000 rental income from a buy-to-let property, your total qualifying income is £52,000. You are in the MTD net.
HMRC gathers data from everywhere. They receive reports from:
If the data they hold suggests you are earning more than you are reporting, they will send a "nudge letter." This is a polite prompt asking you to check your returns.
The Mistake: Many sellers ignore this, assuming it’s a generic circular. It isn't. If you receive a nudge letter, it means HMRC’s Connect system has likely spotted a discrepancy. Ignoring it is the fastest way to turn a prompt into a full tax investigation.
The only way to survive MTD without drowning in admin is automation—but you have to be smart about it, especially in the creator space.
If you are reading this and thinking, "I have no idea if my digital links are broken," it might be time to bring in help.
While software is great, it doesn't understand UK tax law. It won't tell you that you've misclassified an expense or that you've misunderstood the VAT threshold on digital services.
As a specialist ecommerce accountant UK sellers rely on, we handle the architecture of your data. We ensure your flows are compliant with MTD rules so you can focus on sourcing products and creating content, not stressing over HMRC deadlines.
Is your current accounting setup MTD-ready? If you are unsure, let’s have a chat.
Sam Hoye Sam is a specialist ecommerce accountant and the founder of Social Commerce Accountants. He helps UK-based Amazon sellers, TikTok Shop creators, and Shopify brands navigate the complexities of tax, VAT, and MTD. With a focus on modern, cloud-based solutions, Sam removes the headache of compliance for high-growth online businesses.
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