Ecommerce Accounting in the UK
Master ecommerce bookkeeping for marketplace fees, cross-border VAT, stock and payout reconciliation.
Selling online generates a steady stream of small transactions, deducted fees and cross-border complications that quickly overwhelm a simple spreadsheet. Whether you trade through your own Shopify storefront, a marketplace such as Amazon or eBay, or a mix of channels, ecommerce accounting demands a disciplined approach to recording gross sales, separating out platform fees and getting VAT right on every sale. This guide walks UK online sellers through the practical mechanics, from reconciling payout statements to valuing stock at year end. For wider context, see our industry accounting guides hub .
How ecommerce accounting differs
A high-street shop typically banks the full amount a customer pays. An online seller almost never does. Platforms take their cut, payment processors deduct fees, refunds are netted off and the payout that finally lands in your bank account is a net figure that bears little resemblance to your true sales.
The core principle is to record gross sales as income and treat every deduction as a separate expense. If you only ever book the net payout, you will understate turnover, miss VAT you have charged, and lose the deductible costs that reduce your profit. This matters for your VAT return, your Self Assessment or Corporation Tax, and your VAT registration threshold monitoring, since registration is judged on gross taxable turnover, not what reaches your bank.
Recording marketplace and gateway fees
Each transaction usually involves two layers of cost:
- Marketplace fees charged by the selling platform (referral fees, fulfilment charges, monthly subscriptions, advertising).
- Payment gateway fees charged by the processor that moves the money (for example a percentage plus a fixed amount per transaction). These are posted to payment gateway fees in the chart of accounts.
Book these as expenses rather than reducing your sales figure. A typical breakdown for a single order looks like this.
| Item | Amount | Bookkeeping treatment |
|---|---|---|
| Customer pays | 60.00 | Gross sales income |
| Marketplace referral fee | -9.00 | Selling expense |
| Fulfilment / shipping fee | -3.50 | Distribution expense |
| Payment processing fee | -1.20 | Bank / merchant charges |
| Net payout received | 46.30 | Reconciled against bank |
Watch the VAT position of fees carefully. Some platform fees carry UK VAT you can reclaim; others are supplied from overseas and fall under the reverse charge, where you account for VAT in both boxes of your return. For the underlying mechanics, read our guide on taking card and online payments .
VAT on UK and overseas sales
VAT is where ecommerce sellers most often go wrong. The treatment depends on where your customer is, whether they are a business or a consumer, and whether a marketplace is deemed the supplier.
- Domestic sales to UK customers carry UK VAT at the applicable rate once you are registered.
- Sales to EU consumers may fall under distance-selling rules and the Import One Stop Shop, depending on value and fulfilment.
- Marketplace-facilitated sales can make the platform liable to collect VAT on your behalf, particularly for imported goods below the relevant consignment value or for overseas sellers.
- Exports of goods outside the UK are generally zero-rated, provided you hold valid evidence of export.
Because the rules shift with each route to market, keep a clear record of the VAT logic behind every channel. Our explainer on VAT on imports and exports covers cross-border treatment in depth, and you can review the wider VAT schemes and returns hub to choose the right scheme.
Importing stock and import VAT
Many online sellers source goods from overseas suppliers. When goods enter the UK you may face import VAT and possibly customs duty.
Most VAT-registered businesses use Postponed VAT Accounting (PVA), which lets you declare and reclaim import VAT on the same return rather than paying it upfront at the border. To do this you need your monthly postponed import VAT statement from HMRC and your EORI number. Customs duty, by contrast, is a real cost that forms part of your stock value and cannot be reclaimed.
Keep import paperwork, commercial invoices and shipping documents together so each consignment can be tied back to the goods received and the VAT recovered.
Reconciling payouts
Reconciliation is the heart of accurate ecommerce books. The goal is to bridge the gap between gross sales and the net payout in your bank, accounting for every fee, refund and adjustment in between.
A reliable monthly routine looks like this:
- Download the settlement or payout report from each platform.
- Total gross sales, then list every fee category separately.
- Deduct refunds and chargebacks.
- Confirm the resulting net figure equals the payout that hit your bank.
- Post the summary to your ledger and match it to the bank line.
Doing this per settlement period keeps discrepancies small and traceable. Our bookkeeping guides explain reconciliation workflows that apply equally to ecommerce.
Stock valuation
Stock sitting unsold at your period end is an asset, not an expense, and must be carried on your balance sheet. Under UK GAAP, including FRS 105 for micro-entities, stock is valued at the lower of cost and net realisable value.
- Include the purchase price plus directly attributable costs such as inbound freight and customs duty.
- Exclude selling costs and your own marketing.
- Write down slow-moving, damaged or obsolete stock to what it will realistically fetch.
Accurate stock figures feed directly into your cost of goods sold and therefore your taxable profit, so a year-end count matters.
Returns and refunds
Returns are a fact of life online. When you refund a customer, reverse the original sale and the associated output VAT, and bring the returned item back into stock if it can be resold. Restocking fees you retain remain taxable income. Keep refunds visible as a distinct line rather than quietly netting them against sales, so your true return rate and its impact on margin stay clear.
Useful integrations
Manual entry does not scale once order volumes climb. Sensible automation includes:
- A bridging or sync tool that pulls daily sales summaries from each marketplace into your ledger.
- Bank feeds that import payouts automatically for matching.
- Inventory software that tracks stock levels and cost across channels.
These connections keep you compliant with Making Tax Digital by maintaining digital records and a clear audit trail. See the Making Tax Digital and software hub for what counts as a compliant digital link.