Ecommerce accountants in Liverpool for online sellers

If you buy or make things to sell for profit, you are trading and the profit is taxable. Selling your own unwanted belongings now and then is different and is not usually trading.

If your trading income is £1,000 or less in a tax year, the trading allowance means you usually do not need to tell HMRC. Above that, you normally need a Self Assessment tax return. If you are not sure which side of the line you are on, our guide do I need to do a Self Assessment? will help.

Your profit is your sales minus allowable costs. For online sellers, the main ones are:

• The cost of the stock you sold, or the materials you used
• Marketplace and selling fees, such as listing, commission and subscription fees
• Payment processing fees
• Postage, couriers and packaging
• Advertising, including paid listings on the marketplace
• Website, app and software subscriptions
• Storage or fulfilment costs
• Our accountancy fees

Many of these never pass through your bank account because the marketplace takes them before paying you. They are still allowable. That is why we work from the full platform reports, not just your bank statement.

Stock is the cost most often got wrong. You only claim the cost of the goods you actually sold in the year. Stock still on the shelf at the year end is carried forward to the next year. If you buy a big batch in March to sell over the summer, most of that cost belongs in the following year, not this one.

• Declaring payouts instead of full sales, which hides fees you could have claimed
• Forgetting refunds and returns, which reduce your sales
• Mixing personal purchases with business stock on the same card
• Leaving out a smaller platform or a direct website because the sales felt minor

Most of these are fixed by working from complete platform reports each month rather than piecing things together in January.

1. 1

   Download the reports

   We take the settlement or payout reports from each platform you sell on.

2. 2

   Split each payout

   Each payout is broken into sales, refunds, fees, advertising and any VAT, so your accounts show the real figures.

3. 3

   Match to the bank

   The net amount is matched to what actually arrived in your account.

4. 4

   Count the stock

   At the year end, unsold stock is valued so only the cost of what you sold reduces your profit.

We do this in Xero, QuickBooks, Sage, FreeAgent or a spreadsheet as part of our bookkeeping service. You also get profit shown per sales channel, so you can see which platform is worth the effort. If you sell on several marketplaces and your own website, each one is reconciled separately before the figures are combined.

You must register when your taxable turnover goes over £90,000 in the last 12 months, or if you expect to go over £90,000 in the next 30 days alone. It is a rolling 12 months, not the tax year, so check it every month. Turnover means your total sales, not your profit or your payouts. Once registered, you charge VAT on your UK sales and can usually reclaim VAT on business costs. Your prices, margins and marketplace settings may all need to change, so it pays to plan before you reach the threshold rather than after.

Selling to customers overseas brings its own VAT questions. We handle registration and returns through our VAT and Making Tax Digital service. If you trade as a sole trader, Making Tax Digital for Income Tax may also apply to you as your turnover grows.

Our fixed fees start from £99 a month for sole traders and £150 a month for limited companies. Busier shops with several channels and VAT may suit our growing business fee, from £220 a month. After a free 20-minute chat, we send you the exact price in writing within one working day. It stays fixed for 12 months unless the business changes. See our fees page, or read how much does an accountant cost.