Taking Card and Online Payments

Offering customers a fast, familiar way to pay is one of the simplest ways to get paid sooner. Whether you run a market stall, a tradesperson’s van, an online shop or a consultancy, accepting card and online payments reduces friction at the point of sale and cuts down on chasing. The trade-off is that every transaction carries a processing fee, and the money usually lands in your bank a day or two later as a netted settlement. Get the bookkeeping right and those fees and timing differences are easy to manage; ignore them and your accounts will drift out of sync. This guide covers the main ways to take payments and how to record them accurately.

Ways to take payments

Most UK businesses use a combination of methods depending on where the sale happens:

• In person with a card terminal or a mobile card reader paired to a phone.
• Online through a checkout on your website or store platform.
• Remotely using a payment link, QR code or a card detail captured over the phone.
• Bank-to-bank via open banking “pay by bank” or a manual bank transfer.

There is no single best option. Choose based on your average transaction value, sales volume and how customers expect to pay. For background on raising the underlying document, see our guide on how to write an invoice.

Card terminals and online checkouts

A card terminal (or a tap-to-pay mobile reader) suits face-to-face trade. Modern readers accept contactless, chip and PIN, and mobile wallets, and many work over mobile data so you can take payment anywhere. For sales on a website, an online checkout hosted by a payment provider keeps card data off your own systems, which reduces your security obligations.

If you bill regularly for the same service, combine a checkout with stored card details so customers do not re-enter card numbers each time. Our guide on recurring billing and subscriptions explains how to set that up cleanly.

Payment links and pay by bank

A payment link is a one-off URL you send by email, text or messaging app. The customer taps it, enters their card details and pays without you needing a website checkout. Links are ideal for deposits, remote quotes and ad-hoc invoices because you can generate one in seconds.

Pay by bank (open banking) moves money directly from the customer’s bank account to yours. Because it bypasses the card networks, fees are typically lower and there is no card-network chargeback route, though it offers less buyer protection than cards. It works well for higher-value B2B invoices where customers are comfortable authorising a transfer in their banking app.

Comparing processing fees

Fees vary by provider, payment method and whether the card is present. The headline cost is usually a percentage of the transaction plus a small fixed amount per payment, but watch for the extras below.

For low volumes, a simple percentage-only reader is often cheaper than a monthly contract. As volume grows, blended or interchange-plus pricing can work out better. Always compare the effective rate you actually pay, not just the advertised percentage.

Settlement timing

The amount a customer pays is rarely the amount that hits your bank. Providers batch transactions and pay them out as a single settlement, usually after a short delay of a couple of working days. Two things matter here:

1. Timing — sales made today may not settle until later in the week, which affects your cash position. Plan around it using our notes on cash flow forecasting basics.
2. Netting — providers often deduct their fees before paying out, so one bank credit can represent many sales minus total fees.

Recording fees in bookkeeping

The most common mistake is booking only the net amount that reaches the bank. That understates your income and hides the processing fees you have paid. Record the gross sale and the fee separately:

• Gross sale — the full amount the customer paid, recognised as income (and the VAT element if you are VAT registered).
• Processing fee — recorded as a business expense, typically under bank charges or merchant fees.
• Net payout — the difference, matched to the deposit in your bank.

If you are VAT registered, remember that VAT is due on the gross value of the sale, not the net amount after fees. Most card processing fees are exempt from VAT, so there is usually no input VAT to reclaim on them. When in doubt, check the provider’s statement and our guidance on how to complete a VAT return. A consistent treatment also supports a clean digital record under Making Tax Digital.

Reconciling payouts

Reconciliation means matching each bank settlement back to the individual sales and fees it represents. A reliable routine:

• Download the provider’s settlement report for the period.
• Match the total payout to the credit on your bank statement.
• Allocate the gross sales to income and the deducted fees to expenses.
• Investigate any difference straight away — a small gap usually points to a refund, a held transaction or a fee you have not booked.

Accounting software that imports your bank feed and provider data can automate most of this. See automating your bookkeeping for how to reduce the manual work.

Chargebacks and disputes

A chargeback happens when a cardholder asks their bank to reverse a payment, often citing fraud, goods not received or a faulty product. The funds are pulled back from you while the dispute is investigated, and the provider may charge a fee. To protect yourself:

• Keep clear records of the order, delivery and any customer communication.
• Describe goods and services accurately at the checkout.
• Respond promptly with evidence when a dispute is raised.

Frequent chargebacks can put your merchant account at risk, so treat them as a signal to tighten your process rather than a one-off cost.

Related

• Invoicing and getting paid hub
• How to write an invoice
• Recurring billing and subscriptions
• Invoicing and payments guides
• Dealing with late payers