Selling online can feel like printing money. You list a product, orders start pinging on your phone, and the sales dashboard climbs every day. Then you look at the bank balance and wonder where it all went. It’s the first thing our e-commerce accountants look at.
Marketplace fees, payment charges, postage, returns and adverts all come out before you see any profit. Add VAT once you cross the threshold, and a shop that looks busy can be making very little. Plenty of online sellers only find this out when their accounts are done, months after the money has gone.
At Asmat & Co, we work with sellers on Amazon, eBay, Etsy and TikTok Shop, and with brands running their own Shopify or WooCommerce stores. This guide covers the money mistakes we see online sellers make most often, and how the right accountancy support can turn busy sales into real profit.
Here’s how a busy online shop can look healthy while losing money:
| What you see | What is really happening | What helps |
|---|---|---|
| High daily sales | Platforms take fees and refunds before paying out, and some hold back part of your money | Record full sales and fees separately, and forecast your cash every week |
| A growing follower count | Adverts and influencer costs can be more than each new customer is worth | Track the profit from every pound of ad spend, channel by channel |
| A full stockroom | Cash is tied up in slow-moving lines that may never sell at full price | Review stock regularly and clear slow sellers early |
| A record Christmas | January returns, and the 31 January tax bill arrive at the same time | Set money aside for tax and refunds as the sales come in |
Know your real profit per order
Turnover tells you how busy you are. Profit per order tells you whether the business works. For every sale, you need to know the landed cost of the product (including freight from your supplier, duty and packaging), the platform and payment fees, postage, an allowance for returns, and what you spent on adverts to win the order.
An example. A VAT-registered seller sells a product for £50 on a marketplace. VAT takes £8.33 of that. The costs below are shown without the VAT the seller can reclaim. The product costs £18 landed, fees come to £7.50, postage and packaging cost £4.20, and the adverts that won the sale cost £5. That leaves £6.97, a margin of about 14%, before tax and before any returns.
Need Help With Your Accounts Or Tax?
Whether you need support with self assessment, VAT returns, payroll, bookkeeping, CIS, company accounts or corporation tax, Asmat & Co Accountants can provide clear, practical advice for your business or personal finances.
These figures are only an example, and yours will be different. The pattern is the same for most sellers, though: a handful of costs that look small on their own add up to most of the price. Good bookkeeping shows this figure for each product and each sales channel, so you can see which listings are worth pushing and which are quietly losing money.
VAT for online sellers: the £90,000 threshold
You must register for VAT if your taxable turnover goes over £90,000 in any rolling 12-month period, or if you expect it to go over £90,000 in the next 30 days alone. For online sellers, taxable turnover means your total sales, not your profit, and it’s easy to cross the line during a strong Christmas without noticing.
The rolling 12 months is the part that catches people out. It isn’t based on the tax year, so you need to check your total every month. Once you’re registered, VAT is due on your sales, and if your prices don’t allow for it, your margin can disappear overnight.
Pricing tip: If you’re getting close to the threshold, work out your prices as if you were already charging VAT. When you do register, you won’t need to put prices up or eat into your margin.
Once you’re registered, there’s more to get right, from reclaiming VAT on your costs to import VAT on stock and VAT on goods you give away. Our VAT return service handles your registration, helps you choose the right scheme and files your returns through Making Tax Digital software.
Importing stock and selling to EU customers
Many online sellers buy stock from overseas suppliers. When goods arrive in the UK, import VAT and customs duty may be due. If you’re VAT-registered, postponed VAT accounting lets you account for import VAT on your VAT return instead of paying it at the border, which helps your cash flow. Your landed cost should always include duty, freight and any clearance fees.
Selling the other way has become harder since Brexit. Parcels you send to customers in the EU are imports for them, so EU VAT and sometimes duty are due. For parcels worth up to €150, registering for the EU’s Import One-Stop Shop (IOSS) lets you charge the VAT at checkout, so your customer isn’t hit with charges on delivery. Since 1 July 2026, the EU has also charged a temporary €3 customs duty on these low-value parcels. It applies to each type of item in the parcel, not once per parcel, so a mixed order can attract several charges. If EU customers are a big part of your sales, it’s worth getting advice before you set your prices.
Stock, dead stock and your tax bill
Stock sitting on a shelf is cash you can’t spend. Unless you’re a sole trader using the cash basis, your accounts value unsold stock at the year-end at the lower of what it cost and what you can realistically sell it for. If a line has gone out of fashion, writing it down to its true value reduces your profit and your tax bill, as long as your records support it.
That’s why regular stock counts matter. Software figures drift: items get damaged, go missing in a warehouse, or come back unsellable. A physical count matched to your records keeps your accounts accurate and shows you which lines to clear. Selling slow stock at a small loss to free up cash is often better than paying to store it for another year.
Bookkeeping for Amazon, eBay and Shopify sellers
The biggest bookkeeping mistake we see is recording payouts instead of sales. Amazon, eBay, Etsy and Shopify pay you a net amount after taking fees, refunds and sometimes advertising. If only the payout goes into your books, your sales are understated, your costs are missing, and your VAT return may be wrong.
The fix is to connect each sales channel to your accounting software, so the full sale, the fees, and the refunds are recorded separately. We set up QuickBooks with the right connector app for each platform, so you get one set of figures across every channel and can finally compare which platform makes money after its fees.
If you trade through a limited company, our company accounts preparation services turn those records into your year-end accounts and Corporation Tax return. Clear figures for each channel also give lenders, investors and buyers far more confidence in your business.
HMRC can now see your marketplace sales
Since 1 January 2024, online platforms such as eBay, Etsy and Vinted have had to report details of their sellers to HMRC each year. For sellers of goods, a platform has to report you once you make 30 or more sales, or receive about £1,700 (€2,000) or more, in a calendar year. The platform also sends you a copy of what it reports.
This isn’t a new tax, but it does mean HMRC can match platform data against your tax return, and figures that don’t line up are likely to lead to questions. Our self assessment tax return services make sure your marketplace income is reported in full, and every allowable cost is claimed against it.
Selling your own unwanted belongings usually isn’t trading at all. If you do trade on a small scale, the £1,000 trading allowance may mean you don’t need to report it, and that allowance rises to £3,000 from April 2027.
Sole trader or limited company for an online shop?
Most online sellers start as sole traders, which is simple and cheap. Since April 2026, sole traders with income over £50,000 have had to keep digital records and send HMRC quarterly updates under Making Tax Digital, and that threshold falls to £30,000 in April 2027. As profits grow, a limited company can be more tax efficient, and it keeps the business’s debts separate from your own.
| Sole trader | Limited company | |
|---|---|---|
| Tax on profits | Income Tax and Class 4 National Insurance on all profit, whether you take it or not | Corporation Tax at 19% to 25% |
| Paying yourself | The profit is yours to draw | Salary and dividends. Dividends above the £500 allowance are taxed at 10.75%, 35.75% or 39.35% for 2026/27 |
| Liability | You are personally liable for business debts | Your personal assets are generally protected |
| Paperwork | Self Assessment, plus Making Tax Digital if it applies | Annual accounts, Corporation Tax return, confirmation statement and payroll if you take a salary |
Whichever you choose, keep business and personal money apart. Buying personal items through the business, or paying business costs from your own card, creates a mess at the year-end. In a company, it can also leave you with an overdrawn director’s loan account, which brings an extra tax charge if it isn’t repaid in time. Paying yourself properly through salary or dividends, with the paperwork to match, keeps you on the right side of HMRC.
Influencers, free samples and VAT
Sending products to influencers is now a normal part of marketing for many brands, but it has VAT consequences that catch sellers out. If you’re VAT-registered, you can usually give goods away without accounting for VAT as long as the total cost of gifts to any one person stays at £50 or less (excluding VAT) in a rolling 12 months. Go over that and VAT is due on the full amount, not just the excess.
Products sent to influencers in return for posts carry a bigger risk. HMRC’s view is that these aren’t free gifts at all but goods swapped for advertising, and it has raised VAT assessments on brands that treated them as gifts. Keep a record of every product you send out, who received it and what was agreed in return, and talk to us before you start a gifted or paid campaign.
Cash flow: from Black Friday to February
E-commerce cash flow swings hard. You pay for Christmas stock and adverts in October and November. December brings the biggest sales of the year, and then January brings returns and, for sole traders, the 31 January Self Assessment bill at the same time. February is often the quietest month, while rent, wages and software keep going out.
A simple cash flow forecast, updated monthly, shows these pinch points before they arrive. Keep back enough of the Christmas money to cover returns, your tax bill and a few quiet months, rather than spending it all on next season’s stock straight away.
Building a brand someone will buy
Plenty of e-commerce founders hope to sell their brand one day. Buyers check everything: sales by channel, margins, stock, supplier invoices and VAT. If the numbers are messy or don’t match the platform data, the price drops or the deal falls through. Years of clean accounts are one of the most valuable things you can build.
Tax planning matters too. Business Asset Disposal Relief can reduce the Capital Gains Tax rate on selling a qualifying business to 18%, but the lifetime limit on gains that qualify falls from £1 million to £500,000 for sales from 6 April 2027. If a sale is on the horizon, plan the timing early.
Why a local accountant in Birmingham helps
Many online businesses run from a unit or warehouse rather than a laptop. If you’re based in the West Midlands, an accountant in Birmingham you can sit down with makes a real difference. Our West Midlands office in the Old Bank Building, Wednesbury, is within easy reach of Birmingham, so you can bring your paperwork in and talk through stock, VAT and growth plans face to face.
We also look at the cost of running physical premises. Racking, shelving, packing equipment and computers usually qualify for the Annual Investment Allowance, which lets you deduct the full cost, up to £1 million a year, from your profits in the year you buy them. Working with a local accountant in Birmingham means advice built around how your business actually runs.
The online seller’s tips box
- Know your landed cost: Add freight, duty, packaging and platform fees to the factory price. That’s the real cost of each item.
- Audit your apps: Store apps and software subscriptions add up quietly. Cancel the ones you don’t use.
- Plan for returns: Keep part of each payout back for refunds, especially after Black Friday and Christmas.
- Negotiate shipping: Courier rates are often negotiable once your volumes grow, so ask for a better rate.
- Count your stock: Match a physical count to your records regularly, and write off anything damaged or lost.
The 30-second seller check
Answer these three questions honestly:
If you answered no to any of them, it’s worth a conversation. A short review often finds savings, and it gives you a clear picture before your next VAT return or tax bill.
Frequently asked questions
Do I need an accountant to sell on Amazon or eBay?
Not by law, but once you’re selling regularly, an accountant who understands marketplace fees, VAT and stock usually saves more than the fee and keeps you clear of HMRC problems.
When do I have to register for VAT as an online seller?
When your taxable turnover goes over £90,000 in any rolling 12 months, or you expect it to in the next 30 days alone. You can also register earlier if it suits your business.
Will HMRC know about my eBay or Etsy sales?
Very likely. Platforms report sellers of goods who make 30 or more sales, or receive about £1,700 or more, in a calendar year, and HMRC can match that data to tax returns.
Should my online shop be a limited company?
It depends on your profits and plans. We compare both options using your own figures before you decide.
Talk to our e-commerce accountants in Slough
Whether you sell on one marketplace or run a multi-channel brand, Asmat & Co provides fixed-fee accountancy services for online sellers across the UK. We handle bookkeeping, VAT returns, Self Assessment, company accounts and payroll, with QuickBooks management reports included, unlimited support and a reply within three hours.
Visit our head office at 84 High Street, Slough, or call 01753 424 968. We also see clients at our Reading branch and our West Midlands office. Book a meeting with Asmat & Co today. We do Numbers & You do Business!
This article is general information for the 2026/27 tax year, including changes announced in the Autumn Budget on 28 October 2026. It isn’t personal tax advice. Please speak to us about your own circumstances before acting.
Need Help With Your Accounts Or Tax?
Whether you need support with self assessment, VAT returns, payroll, bookkeeping, CIS, company accounts or corporation tax, Asmat & Co Accountants can provide clear, practical advice for your business or personal finances.
