Accounting for UK online sellers
The single biggest error in ecommerce bookkeeping is treating the payout as the sale. The money that reaches your bank has already had fees taken out, and both halves belong in your accounts.
Gross sales, then fees
If you sell for a hundred pounds and the platform pays you eighty-eight, your turnover is a hundred and your costs include the twelve. Recording only the payout understates turnover, which matters for the VAT registration threshold, and hides a deductible expense.
Marketplace VAT rules
For some sales, particularly imported goods and sales by overseas sellers, the marketplace is responsible for accounting for the VAT rather than the seller. That changes what you report. Which rule applies depends on where the goods and the seller are, so it is worth establishing once for each channel you sell through rather than assuming they behave the same.
Stock and cost of sales
Unsold stock is not an expense yet. Under accruals accounting it sits on the balance sheet until sold. Under cash basis the treatment differs. Either way, a business holding significant stock cannot judge profitability from the bank balance alone.
Common questions
Is my turnover the payout or the sale price?
The sale price. Platform fees are a separate deductible expense. This matters most for the VAT registration threshold, where using payouts can leave you registering late without realising.
Do I need to register for VAT if I sell on a marketplace?
It depends on your own taxable turnover and on whether the marketplace is accounting for VAT on particular sales. Being on a marketplace does not remove your own registration obligation, so test your rolling twelve-month turnover as normal.
What about selling to customers overseas?
Place of supply rules determine whether UK VAT applies, and they differ for goods and services and by destination. Post-Brexit rules for EU sales changed significantly, so check the current position for your goods rather than relying on older guidance.
Last updated 2026-04-25. Thresholds, rates and allowances are indexed or reset at fiscal events and are deliberately not quoted here; check GOV.UK for current amounts.