You did not start your online shop so you could worry about bookkeeping, VAT, and HMRC letters. Yet once the orders start to ping in, your spreadsheets, bank feeds, and marketplace reports can feel like a storm you did not sign up for.

If you sell on Shopify, Amazon, Etsy, eBay, or your own site, the rules are not the same as a simple high street shop. Online selling has its own quirks, especially with accounting for e commerce businesses in the UK, cross‑border VAT, and marketplace fees.

This guide keeps things simple and practical. You will see what you must do for HMRC, what is just nice to have, and where a joined‑up service like Figures can quietly handle the numbers in the background while you focus on sales.

What makes accounting for UK e commerce businesses different?

An online shop looks simple from the outside. Customers click, pay, and get their parcel. Behind the scenes, the numbers are far more tangled than a single till in one shop.

You deal with hundreds of small card payments, several selling platforms, shifting fees, and sales to different countries. All of that needs to land in your accounts in a tidy way or your VAT and profit figures will be off.

High volume online sales and messy data from multiple channels

E commerce brings lots of tiny moving parts. You might have hundreds of orders a month, each with its own mix of items, discounts, postage, and refunds.

If you try to do the books straight from your bank statements, you only see lump‑sum payouts from Shopify, Amazon, or PayPal. You can not see:

• which part was sales
• which part was VAT
• which part was fees or refunds

That makes it easy to underpay VAT or think you are more profitable than you really are. You need a way to pull clean summary data from each sales channel so your accounts match reality.

Platform fees, payment processors, and payout timing

Marketplaces and payment gateways take their cut before the money reaches your bank. Listing fees, seller fees, payment charges from Stripe, PayPal, Klarna, and currency conversion all chip away at your margin.

If you only record the net payout, you lose sight of the true cost of each sale. Good e commerce bookkeeping records:

• Gross sales (what the customer paid)
• Fees and charges
• Net payout

This lets you see profit by channel, spot expensive gateways, and keep VAT right, since VAT is based on the gross sale, not what finally hits your bank.

VAT, cross border sales, and post‑Brexit rules

VAT gets more tangled once you sell outside the UK. You have:

• The UK VAT registration threshold, currently £90,000 of taxable turnover in a rolling 12‑month period
• Sales to EU consumers, where schemes like IOSS or OSS can apply
• Sales to overseas businesses, which can be treated differently
• Cases where marketplaces collect VAT for you at checkout

You can not treat an order to France the same as an order to Leeds. You need records that show where your customer is based, what they bought, and who, if anyone, collected the VAT.

Stock, fulfilment, and returns that affect your real profit

If you hold stock, use a 3PL, or sell through Amazon FBA, your numbers change again. Money leaves the bank when you buy stock, but that whole cost should not hit your profit and loss on day one.

You need a simple way to track:

• Stock on hand
• Cost of goods sold
• Returns, write‑offs, and damaged items

Without basic stock accounting, your revenue may look great while your profit figure lies to you. You could be selling a popular product that quietly loses money every time it ships.

Get your UK e commerce bookkeeping basics right from day one

You do not need to become an accountant to run clean books. A simple system, set up early, makes VAT returns, annual accounts, and self assessment far quicker and far less stressful.

Think of it like building good warehouse shelves. Once they are in place, everything has a home and it is easy to find what you need.

Choose the right accounting software for your online shop

Cloud accounting tools are your base. In the UK, common options are Xero, QuickBooks, and FreeAgent. Pick one that has:

• Reliable bank feeds
• Direct links or apps for Shopify, Amazon, Etsy, and others
• Multi‑currency support if you sell abroad
• Easy VAT reporting and Making Tax Digital support

You do not need to test every tool. What matters is that it works well with your sales channels. A service like Figures can help you pick and set up the right option from day one, so you do not have to rebuild things later.

Connect your sales channels and payment providers properly

Manual CSV uploads are tempting at the start, but they get messy fast. It is far better to:

• Connect your sales channels and payment providers using approved apps or direct integrations
• Pull in summary entries per payout or per day, not every single order

This gives you books that are tidy but still accurate. You get clean totals for sales, VAT, and fees by channel, without drowning in thousands of lines.

Separate business and personal money with clean bank accounts

Mixing personal and business spending might feel harmless when you start, but it creates chaos later. Open a proper business bank account and run all business income and costs through it.

That way you:

• Cut bookkeeping time
• Avoid awkward questions if HMRC ever checks your records
• See what cash is really free to reinvest or pay yourself

Even as a sole trader, this simple step makes your life far easier.

Set up a simple chart of accounts tailored to e commerce

Your chart of accounts is just the list of categories used in your books. A good e commerce setup might include:

• Sales by channel (Shopify, Amazon, Etsy, eBay, wholesale)
• Shipping income
• Discounts and returns
• Cost of goods sold
• Merchant and payment fees
• Advertising and marketing
• Software subscriptions
• Wages and freelancers
• Fulfilment and postage

With the right categories, your reports stop being just a tax chore and start answering real questions about your business.

Create a weekly bookkeeping routine you can actually stick to

Little and often beats a year‑end panic. A simple weekly routine might be:

• Reconcile bank and payment feeds
• Check marketplace payouts against platform reports
• Record stock purchases
• File receipts in your software or cloud folder

This can take less than an hour once you are in the habit. If even that feels heavy, an all‑in‑one service like Figures can run this routine for you, so your books stay fresh while you focus on products and customers.

Stay on top of UK VAT for your e commerce store

VAT feels scary, but you do not need to know every rule. You just need to know when it applies to you, how to record it, and when to ask for help.

The aim is simple. No surprise bills, no missed deadlines, and no money left on the table.

When does your UK e commerce business need to register for VAT?

In the UK, you must register for VAT when your taxable turnover goes over £90,000 in any rolling 12‑month period. Taxable turnover is the total of your VATable sales, not your profit.

You should keep a simple monthly summary of your sales so you can see when you are close. Some founders choose to register early, for example if they:

• Spend a lot on stock and other VATable costs
• Want to look more established to trade partners

Marketplace collected VAT does not replace your own registration. You still track your turnover and decide if you need to register with HMRC.

How to record and charge VAT on UK sales correctly

Most physical products are standard rated, so you charge 20 percent VAT on UK sales once you are registered. Some items, for example children’s clothes or books, can be zero rated or reduced.

Your product tax codes inside Shopify, Amazon, or your chosen platform control how VAT is charged. Your accounting software and integrations then pull that VAT data across.

If those links are set up badly, you could underpay or overpay HMRC. It pays to check how a few sample orders flow from your shop to your accounting system.

Selling to EU and international customers without losing track

Post‑Brexit, selling to EU customers has changed. For low‑value items, some sellers use IOSS (Import One Stop Shop). For wider EU sales, there is OSS (One Stop Shop). On top of that, some marketplaces, like Amazon, may collect VAT at checkout for certain orders.

You do not need every detail, but you do need to:

• Track where your customers live
• Track where your stock sits
• Know who is responsible for collecting VAT on each type of sale

If you are unsure, this is a good point to talk to a specialist, rather than guess and hope HMRC agrees later.

Avoid common VAT mistakes that cost UK e commerce founders money

Many online sellers stumble on the same problems:

• Treating marketplace payouts as sales, instead of splitting out VAT and fees
• Forgetting to adjust VAT for refunds and returns
• Ignoring overseas sales when counting towards the VAT threshold
• Claiming VAT on costs that are not allowed
• Missing VAT deadlines and picking up penalties

The impact is simple. Surprise tax bills, wasted cash, and extra stress. A UK accountant who understands e commerce will review your VAT returns before they go to HMRC and catch issues early.

Track profit, cash, and stock so your e commerce business can grow

Once the basics are set, your numbers stop being just a compliance task. They become a dashboard that shows if your shop is healthy or just busy.

You can then make better calls on pricing, ads, stock, and hiring.

Understand your real profit after all e commerce costs

Turnover looks good in screenshots, but it does not pay your mortgage. Real profit starts with sales, then strips out:

• Refunds and discounts
• Shipping and packaging
• Cost of goods sold
• Merchant and payment fees
• Marketing and ad spend
• Overheads like software, wages, and rent

If you can, look at margin by product or by channel. You might find that one marketplace brings lots of orders but weak profit, while your own site quietly makes more per sale.

Use simple cash flow planning so you do not run out of money

Profit and cash are not the same thing. In e commerce, you often pay for stock upfront, pay ads weekly, then wait for payouts from platforms.

A basic monthly cash flow view shows:

• Money coming in from each channel
• Money going out for stock, ads, tools, and tax
• What is left to pay yourself

This does not have to be fancy. A simple spreadsheet or a report in your accounting software can help you plan VAT and tax payments and avoid that “how will I cover this?” moment.

Manage stock and cost of goods sold without complex systems

You do not need a warehouse‑grade stock system at the start. You do need a clear view of what stock you hold and what it cost you.

A light approach could be:

• Keep purchase records with quantities and unit costs
• Do a stock count at least once a quarter
• Adjust your cost of goods sold in your accounts based on that count

This gives you a much better feel for which products truly make money, especially once you factor in returns and write‑offs.

Use simple reports to make better decisions each month

Three reports will take you a long way:

• Profit and loss tells you if you made a profit this month and where it came from
• Balance sheet shows what you own (stock, cash) and what you owe (loans, VAT, tax)
• Cash summary shows cash in and out over a period

With these, you can answer useful questions. Can you afford to hire a packer? Should you increase ad spend for a winning product? Is Amazon more profitable than your own site, once you strip out all the fees?

Work with a UK accountant who understands e commerce

You can DIY for a while. At some point, the mix of platforms, VAT rules, and growth plans means you get more value from having a specialist in your corner.

The right help turns accounting from a constant worry into a quiet support system.

When should you stop doing your own e commerce bookkeeping?

It is usually time to bring in help when:

• You keep putting off bookkeeping for “later”
• VAT rules make your head hurt
• You are not sure how much you can safely pay yourself
• You plan to scale with new products, countries, or staff

Getting support early often costs less than fixing mistakes later. It also gives you back hours each month for marketing, suppliers, and customers.

What to look for in a UK e commerce accountant or service

Not every accountant understands online selling. When you choose a partner, look for:

• Real experience with Shopify, Amazon, Etsy, and similar platforms
• Comfort with payment tools like Stripe, PayPal, and Klarna
• Support for Making Tax Digital and online VAT filing
• Clear fixed fees with no surprise add‑ons
• Helpful advice and regular check‑ins, not just form filling

Figures, for example, bundles bookkeeping, VAT, payroll, and company accounts in one place, so you do not have to juggle several providers.

How a service like Figures can plug into your existing tech stack

A modern UK accounting service should plug straight into your current tools. With Figures, you connect Shopify, Amazon, your bank, and your accounting software.

From there, the team handles:

• Daily bookkeeping and reconciliations
• Quarterly VAT returns
• Monthly payroll if you have it
• Year‑end accounts and tax filings

Pricing is simple. Founder Mode, at £100 per month, suits earlier‑stage founders who want clean books and compliance. Growth Mode, at £180 per month, adds quarterly VAT, monthly payroll, and a director self assessment. Both options are built for online businesses and come with friendly, jargon‑free support.

Conclusion

Accounting for e commerce businesses in the UK is different from running a local shop, but it does not have to take over your life. With clean bookkeeping, clear VAT records, and a basic grip on profit, cash, and stock, you turn guesswork into informed choices.

You do not have to fix everything at once. This week, you could open a separate business bank account, connect your sales channels to proper software, or book a call with a specialist like Figures to review your setup.

Each small step makes your numbers more useful and your tax position safer. Over time, that adds up to a stronger, more profitable business that gives you more freedom and fewer nasty surprises from HMRC. You are closer to that point than you think.