Online shops run from Watford homes and units
Plenty of online businesses around Watford started on a dining table. A seller in Garston packing orders after work, a craft business in Kings Langley listing on Etsy, a reseller in Harrow sourcing stock from wholesalers. Some grow into a rented unit and a few part time packers. With the M1 and M25 meeting just north of the town, Hertfordshire suits sellers who need couriers and suppliers within easy reach.
The accounting problems are much the same whatever the size. Money arrives in lumps from platforms, fees and refunds are netted off before you see anything, and stock sits on shelves for months before it sells. Accountants for ecommerce in Watford need to unpick all of that before they can tell you what you actually earned.
Making sense of marketplace payouts
An Amazon or eBay payout is not your sales figure. It is what is left after selling fees, advertising, fulfilment charges, refunds and sometimes VAT have been taken off. If only the payout goes into your books, your turnover is understated and your costs are missing, which can cause problems with VAT thresholds and with HMRC later.
We use the settlement reports from each platform to record gross sales and every fee separately. Linking tools can pull this into Xero or similar software automatically, so the figures build up through the year instead of in one painful week just before the 31/1 deadline.
What is included
- Bookkeeping from Amazon, eBay, Etsy and Shopify reports
- Linking marketplace data to Xero or QuickBooks
- Registering for VAT and filing quarterly returns
- Import VAT and postponed VAT accounting checks
- Stock and margin reporting
- Self assessment returns for sole trader sellers
- Company accounts and corporation tax for online brands
- Help putting past undeclared sales right
Platforms now report sellers to HMRC
Since 1/1/2024, digital platforms have had to collect details about sellers and report what they earn to HMRC each year. That includes online marketplaces for goods, as well as platforms for services and property lets. A seller of goods is left out of the reporting only if they made fewer than 30 sales and received 2,000 euros or less in the year.
The reports do not create a new tax. They make it much easier for HMRC to spot people who are trading online but have not told it. If you have been selling for a while without registering, it is far better to put things right yourself before HMRC gets in touch, and we can help you do that.
Accountants for ecommerce sellers and VAT
You must register for VAT once your taxable turnover goes over £90,000 in a rolling 12 month period, or if you expect it to pass that figure in the next 30 days alone. For online sellers, turnover means gross sales before platform fees, so it is easy to cross the line without noticing.
Imports bring their own rules. If you bring stock in from abroad, postponed VAT accounting lets many businesses account for import VAT on their VAT return instead of paying it up front at the border. Sellers based outside the UK who sell goods stored here have to register for VAT whatever their turnover, and in some cases the marketplace itself is responsible for the VAT on their sales. Good accountants for ecommerce businesses will check which of these apply before your first return, not after.
Stock, margins and returns
Most sole traders now use the cash basis by default, which means costs count when you pay them. That keeps things simple, but it can make a year when you bulk buy stock look like a loss even though the goods are sitting in your spare room. A limited company or a seller using traditional accounting deals with unsold stock at the year end instead.
Either way, you need to know your margin on each product after fees, postage and returns. As accountants for ecommerce businesses in Watford, we help you set up reports that show which lines make money and which just keep you busy.
Sole trader or company for an online business
Many online sellers start as sole traders, then think about a limited company once profits grow. The right time depends on your profit, how much you need to take out to live on, and whether you plan to reinvest heavily in stock. We look at those numbers with you and give a clear recommendation, along with the extra filing a company brings.
A company also changes how you pay yourself. Profits are taxed at corporation tax rates inside the company, and you then draw a salary, dividends or both. For a seller who reinvests most of the profit in new stock, leaving money in the company can work well. For one who needs every pound to live on, the savings can be smaller than expected once the extra costs are counted.
Who this suits
- Marketplace sellers in Watford growing past a side income
- Shopify and own website brands in Hertfordshire
- Resellers and importers buying stock from overseas
- Etsy makers turning a hobby into a business
- Online sellers ready to move into a limited company
Common questions
What is the digital platform reporting rule?
Since 1/1/2024, online marketplaces and other platforms must report sellers' details and earnings to HMRC every year. Sellers of goods with fewer than 30 sales and 2,000 euros or less are left out. It is a reporting rule, not a new tax.
Do I count my Amazon payout or my total sales as turnover?
Your total sales. The payout is what remains after fees and refunds, which are business costs. Your accounts and your VAT threshold checks should both be based on gross sales.
I bought a lot of stock this year and show a loss. Is that right?
On the cash basis it can be, because stock is a cost when you pay for it. It usually evens out the following year when that stock sells. We can check whether traditional accounting would give a fairer picture for you.
Can I sell online from home in Watford without telling HMRC?
If you are trading, buying goods to sell on at a profit or making products to sell, you must register once your trading income goes over £1,000 in a tax year. The £1,000 trading allowance covers very small sellers.
What is postponed VAT accounting?
It lets VAT registered businesses declare and reclaim import VAT on the same VAT return, instead of paying it when goods arrive. For many importers that means no cash tied up in import VAT.
Which accounting software works best for online sellers?
Cloud software such as Xero or QuickBooks works well, especially with a linking tool that reads marketplace settlement reports. The best choice depends on how many channels you sell through and how many orders you handle.
Do I need to keep records of every parcel I post?
You need records that support your sales and costs, including postage, packaging and courier charges. Platform reports and courier invoices usually cover this. Sole traders must keep records for at least 5 years after the 31/1 deadline for that tax year, and companies for 6 years.
I sell on several platforms. Do they all report me to HMRC?
Each platform that falls under the rules reports its own sellers, so you may appear in more than one report. HMRC can then compare those totals with your tax return. That is why your accounts need to show the gross sales from every channel.