PayPal · MTD for Income Tax

MTD for Etsy and eBay sellers who also take PayPal

Last reviewed 28 October 2026 against GOV.UK guidance. General information, not tax advice.

Short answer: If you sell on Etsy or eBay and also take payments through PayPal (direct sales, invoices, social media or a website checkout), all of it is turnover from the same business. The main risk is counting a sale twice: once in the marketplace export and again in PayPal. The other is counting transfers to your bank as income. Neither should be in turnover twice.

Where double counting comes from

Website or shop checkouts paid with PayPal. If your shop platform reports the order and PayPal reports the payment, the same sale appears in both files.
Overlapping downloads. Two PayPal downloads with overlapping date ranges repeat the same rows.
Money moving between your own accounts. Withdrawals to your bank, or marketplace payouts sent to PayPal, are transfers, not sales.

Etsy and eBay now usually pay sellers through their own payment systems, so most PayPal activity for these sellers is off-marketplace sales. Check your own activity: older or unusual setups can differ.

One business, several sources

HMRC needs separate digital records and quarterly updates for each sole trader business, not each payment method. If PayPal sales are part of the same shop, they go into the same records as your Etsy and eBay sales. Keeping a column for the source of each row helps you check totals against each platform.

What to export from PayPal

PayPal's activity download gives a CSV of transactions with date, type, gross, fee, net, currency and balance.

Sign in to your PayPal business account and open Activity.
Find the option to download activity (often under Statements or Reports, then Activity download).
Choose CSV, set the date range to the MTD period, and download.
Download your Etsy monthly statements and eBay Transaction report for the same dates.

Keep the Gross and Fee columns. Gross is turnover (less refunds) and Fee is an expense. Don't use Net as turnover.

Worked example: sorting PayPal rows

Example Illustrative PayPal rows, not real data.

PayPal row	Gross	Treatment
Payment received: Instagram order	£60.00	Turnover (fee of £2.00 is an expense)
Website checkout, order also in shop export	£45.00	Duplicate: counted once, from the shop export
Payment refund	−£20.00	Reduces turnover
Withdrawal to bank	−£500.00	Transfer: not income or expense
Purchase: packaging supplier	−£38.50	Possible expense: check it's for the business

Only £40.00 of turnover comes from these five rows (£60 less the £20 refund). The withdrawal and the duplicate don't count.

Key dates for the April 2027 group

Date	What happens
31 Jan 2027	Deadline for your 2025 to 2026 return. It's the one HMRC uses for the £30,000 test
6 Apr 2027	MTD starts if qualifying income was over £30,000. Digital records from this date (standard periods)
7 Aug 2027	First quarterly update (6 Apr to 5 Jul 2027)
7 Nov 2027 · 7 Feb 2028 · 7 May 2028	Updates 2, 3 and 4 (each cumulative from 6 April)
31 Jan 2029	Submit the 2027 to 2028 tax return through your software and pay
6 Apr 2028	Threshold falls to £20,000, based on the 2026 to 2027 return

Penalty points for late quarterly updates apply from 2027 to 2028. 4 points means a £200 penalty. GOV.UK: send quarterly updates.

Want your PayPal exports turned into one MTD-ready workbook?

TidyTill reads Etsy, eBay, Amazon, PayPal and Shopify exports, works out gross turnover, splits it into MTD periods and flags gaps and duplicates. Upload your exports and see your totals, quarters and Health Check free before you pay. Then £19 one-off for a workbook or £49 a year for unlimited workbooks. Paid workbook downloads open very soon; the free preview works now.

Try the free preview Get launch updates

Questions

Do I report PayPal gross or net under MTD?

Gross. HMRC's guidance says that if you only know your net income, you should find the full amount, record it as income, and record expenses separately. PayPal's Gross and Fee columns give you both.

Are PayPal Friends and Family payments income?

If a customer paid you for goods you sell, it's business income whichever way they paid. Genuine personal payments aren't. Label them clearly so they're easy to exclude.

Does PayPal report me to HMRC?

Digital platform rules cover platforms that let you sell goods or services. Whether a particular payment service reports depends on how you use it. Your tax position doesn't depend on whether you're reported.

Sources

Create digital records (digital links, simpler categorisation, net income) (GOV.UK)
Send quarterly updates (update periods and deadlines) (GOV.UK)
Using Making Tax Digital for Income Tax for the first time (GOV.UK)
Selling goods or services on a digital platform (platform reporting) (GOV.UK)
Activity Download report (PayPal Developer)
How to calculate your Etsy Payments deposit amount (monthly statement CSV) (Etsy Help)
Reconciling your eBay sales transactions (Transaction report) (eBay UK Help)

This page is general information based on the GOV.UK guidance linked above, as it stood on 28 October 2026. It isn't tax advice. Rules and dates can change, so check GOV.UK or ask an accountant about your own situation. TidyTill isn't HMRC-recognised software and doesn't send anything to HMRC.