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Foreign currency sales under MTD: which exchange rate to use

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

Short answer: MTD digital records are kept in sterling. HMRC's Business Income Manual says sole traders can use London closing rates, a rate quoted by their bank, or HMRC's published monthly rates. HMRC only needs to query a rate if it is very different from reputable sources. Its accounting guidance also accepts an average rate, such as a monthly one, when rates don't move much in the period. What matters most is using a reasonable source consistently.

When conversion comes up for online sellers

  • PayPal balances held in USD or EUR, or sales received in a foreign currency
  • Shopify stores with payouts in more than one currency
  • Amazon sales on EU or US marketplaces, settled in local currency
  • Etsy listings priced in a foreign currency. Etsy statements are in your payment account currency, so check which currency yours uses.

If a platform has already converted to sterling before paying you, its sterling figure is usually the simplest record, provided you can see the conversion and any currency fee, which is an expense.

Using HMRC's monthly rates

HMRC publishes monthly exchange rates, plus spot and average rates, on GOV.UK's Trade Tariff service as downloadable files. A simple, defensible method is to convert each transaction at the HMRC monthly rate for the month it happened, and to note the rate and source next to it in your records. If a rate is missing for a currency or month, record what you used instead and label it.

What to keep with each foreign currency row

Whatever rate source you choose, keep enough to show your working:

  1. The original amount and currency, from the platform export.
  2. The transaction date.
  3. The rate used and where it came from (for example, HMRC monthly rate, May 2027).
  4. The sterling amount used in your MTD records.
  5. Any platform currency conversion fee, as a separate expense.

Our converter does this automatically. It applies HMRC monthly rates per transaction month and flags any row where a fallback rate had to be used.

Worked example: a USD sale

Example Hypothetical rate for illustration only. It isn't a published HMRC rate.

ItemValue
Sale received through PayPal, 14 May 2027US$1,000.00
Rate used (hypothetical HMRC monthly rate, May 2027)1.2500 USD per £1
Sterling turnover recorded£800.00
PayPal fee (US$38.00 at the same rate)£30.40 expense

If you later move the USD balance to your sterling bank account at a different rate, that's a separate currency question. HMRC's manual covers exchange differences. Ask an accountant if the amounts are significant.

Key dates for the April 2027 group

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

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Questions

Do I have to use HMRC's exchange rates?

No. HMRC's manual says the London closing rate isn't an official rate, and traders can use other rates, such as their bank's rate or HMRC's monthly average rates. Use a reasonable source and stick to it.

Can I convert the whole quarter at one average rate?

HMRC's accounting guidance allows an average rate when rates don't fluctuate significantly in the period, and gives a monthly average as its example. Converting month by month is the safer default.

Sources

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.

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