eBay Accounting UK: Seller's Guide for 2025/26

You started selling on eBay to make money, not to wrestle with spreadsheets. But once the orders pick up, the bookkeeping gets real. HMRC wants to see your sales, your costs and your VAT position, and eBay's payouts don't make that obvious.

This guide walks you through eBay accounting for UK sellers in plain English. We'll cover how to record sales, reclaim and charge VAT, track expenses, work out your cost of goods sold, reconcile eBay's payouts and stay on top of your tax deadlines for the 2025/26 tax year.

It's written for sole traders and small limited companies selling on eBay UK, whether you're a side-hustler or doing this full time. Every tax figure here is dated to its tax year and linked to the relevant gov.uk page.

Do eBay sellers need to keep proper accounts? {#do-ebay-sellers-need-proper-accounts}

If you're selling on eBay as a business, then yes. The moment you buy or make things to sell on for a profit, HMRC treats you as trading, and you have to declare that income.

There's a bit of breathing room first. If your total income from selling, including eBay, stays below the £1,000 trading allowance in a tax year, you usually don't need to report it. Go over that, and you'll need to register and file a return. You can check the rules on the gov.uk selling online and paying taxes page.

eBay also reports seller data to HMRC under the digital platform reporting rules, so the days of assuming "they'll never know" are gone. Good records protect you here.

Keeping proper accounts isn't just about staying out of trouble. It tells you which products actually make money, how VAT affects your margins, and whether your cash flow can handle the next stock order. That's the real payoff.

The work itself comes down to a handful of jobs: recording sales correctly, tracking expenses, handling VAT if it applies, working out cost of goods sold, and reconciling what eBay pays you. We'll take each in turn.

If you'd rather hand it over, our team handles ecommerce books day in, day out. You can read more on our ecommerce accounting page or our eBay sellers page.

How do I record my eBay sales? {#how-do-i-record-my-ebay-sales}

The golden rule: you report your gross sales, not the money that lands in your bank account.

eBay runs a managed payments system. It collects what the buyer pays, takes its fees, then pays you the remainder. So your bank statement shows a net payout, but HMRC and your accounts need the full picture.

For every payout period you want to capture three figures:

• Gross sales - the total your buyers paid, including any VAT and postage they were charged.
• eBay fees - everything eBay deducted, recorded as a business expense.
• Net payout - what actually hit your bank, which should equal gross sales minus fees.

If you only record the net payout as income, you'll understate both your turnover and your expenses. That can push you the wrong side of a VAT threshold without realising, and it loses you the expense deduction for the fees.

What about sales in other currencies?

If you sell on eBay US, eBay Germany or any non-UK site, you trade in foreign currency but report to HMRC in pounds.

Convert each sale to sterling using a consistent, defensible rate, either the rate on the transaction date or HMRC's published monthly rates. Keep a note of the rate you used. Any currency conversion fees are an allowable expense.

You can find the official rates on the gov.uk HMRC exchange rates page.

When do eBay sellers need to register for VAT? {#when-do-ebay-sellers-register-for-vat}

Talk to an e-commerce accountant →

VAT is where eBay accounting gets fiddly, so let's keep it simple.

You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12-month period. That threshold has applied since 1 April 2024. You can see it on the gov.uk VAT registration thresholds page.

You can also register voluntarily below that figure. Some sellers do this to reclaim the VAT they pay on stock and supplies, though it then means charging VAT on your sales too, so it's a balance worth modelling before you commit.

One catch for overseas sellers: if your business isn't based in the UK but you sell goods to UK customers, there's no threshold. You're generally expected to register from your first UK sale.

How does charging and reclaiming VAT work?

Once you're registered, two sides matter.

Output VAT is the VAT you charge on sales. For goods located in the UK at the point of sale, the standard rate is 20% (gov.uk VAT rates). You add it to your prices and pay it over to HMRC.

Input VAT is the VAT you pay on business purchases: stock from UK suppliers, packaging, eBay fees, software subscriptions. You can usually reclaim it on your VAT return, which reduces what you owe.

Keep every VAT invoice. If you're VAT registered, you also have to keep digital records and file through MTD-compatible software under Making Tax Digital for VAT.

If you import stock to sell, you'll usually pay import VAT when goods enter the UK, and Postponed VAT Accounting lets VAT-registered businesses account for it on the return rather than paying upfront. You may also need an EORI number.

Our VAT and self-assessment support sits within our wider services if you want a second pair of eyes on your scheme choice.

How does VAT work on international eBay sales? {#vat-on-international-ebay-sales}

VAT treatment depends on where your stock sits and where it's going. Here's the shape of it for the most common cases.

For low-value goods (£135 or under) sold into the UK from overseas, the seller, not the buyer, accounts for the UK VAT. That rule has applied since 1 January 2021. HMRC sets out the detail on its goods sold to UK customers by overseas businesses guidance.

If you sell from the UK into the EU, the One Stop Shop (OSS) and Import One Stop Shop (IOSS) schemes can simplify EU VAT. Whether you need them depends on your sales pattern. HMRC covers this on its VAT and overseas goods sold to EU customers guidance.

The common mistakes we see are straightforward to avoid: overseas sellers not registering for UK VAT when they should, applying the wrong treatment to sub-£135 consignments, and not keeping import VAT records separate. Clean records at the point of sale save a lot of unpicking later.

Which expenses can eBay sellers claim? {#which-expenses-can-ebay-sellers-claim}

Every allowable expense you record reduces your taxable profit. For eBay sellers, the usual categories are:

• eBay selling fees - final value fees, listing fees and any promoted-listing costs. eBay deducts these before paying you, so record them separately from your sales.
• Cost of stock - what you paid for the goods you sell (this feeds your cost of goods sold, below).
• Postage and packaging - couriers, postage labels, boxes, tape, bubble wrap.
• Software subscriptions - your bookkeeping and listing tools.
• Advertising - eBay promoted listings and any external ads.
• Professional fees - your accountant, for example.
• Home office costs - if you work from home, you can claim a simplified flat rate or a fair proportion of actual costs.

The expense rules sit on the gov.uk business expenses if you're self-employed page.

Three mistakes cost sellers money. Mixing personal and business spending makes everything harder, so use a separate business bank account. Ignoring the small stuff like packaging tape adds up over a year, so capture it all. And forgetting your home-office claim leaves cash on the table.

What is cost of goods sold and how do I calculate it? {#what-is-cost-of-goods-sold}

Cost of goods sold (COGS) is what the stock you actually sold during the period cost you. It's not the same as everything you bought, because some of what you bought is still sitting on the shelf.

The formula is:

Opening inventory + purchases - closing inventory = COGS

• Opening inventory is the value of stock you held at the start of the period.
• Purchases is the cost of stock you bought during the period.
• Closing inventory is the value of stock left at the end.

Always value inventory at what you paid for it, never at the price you hope to sell it for.

Illustrative example. Say you run an eBay shop with an accounting year of 1 April 2025 to 5 April 2026.

• Opening inventory at 1 April 2025: £5,000
• Purchases during the year: £30,000
• Closing inventory at 5 April 2026: £8,000

COGS = £5,000 + £30,000 - £8,000 = £27,000.

Your gross profit is then your sales minus that COGS figure. Get COGS wrong and your profit, and your tax bill, will be wrong too.

A quick word on method. Most UK small businesses value stock on a first-in, first-out (FIFO) or weighted-average basis and stick with it. LIFO isn't accepted under UK accounting standards. Once you pick a method, stay consistent year to year.

If stock gets damaged or becomes unsellable, write it off and keep a note of why. The write-off reduces your taxable profit, and the note matters if HMRC ever asks.

How do I reconcile eBay managed payments? {#how-do-i-reconcile-ebay-managed-payments}

Because eBay bundles sales and fees into one payout, reconciliation is what keeps your books honest. The goal is simple: prove that gross sales minus eBay fees equals the payout that hit your bank.

A monthly routine works well:

1. Pull the report. In eBay's Seller Hub, go to Payments, then Reports, and download the transaction report for the period.
2. Pick out the figures. Total gross sales (including VAT and postage charged), total fees by type, and the net payout.
3. Post to your books. Record gross sales as income and each fee category as an expense.
4. Match the bank. Confirm the net payout equals the deposit on your bank statement.
5. Flag anything odd. Investigate discrepancies straight away while the detail is fresh.

Doing this monthly rather than once a year means you catch problems early and your VAT returns are built on clean data. Most cloud bookkeeping packages can pull eBay data in automatically, which saves the manual export, but the principle is the same either way.

Reconciliation is one of the jobs clients most often hand to us. If it's eating your evenings, our bookkeeping service can take it off your plate.

What tax do I pay on eBay income? {#what-tax-do-i-pay-on-ebay-income}

What you pay depends on whether you trade as a sole trader or through a limited company. All figures below are for the 2025/26 tax year.

Sole traders

You report your eBay profit (sales minus allowable expenses and COGS) on a Self Assessment tax return and pay income tax plus National Insurance on it.

Income tax for 2025/26, after the £12,570 personal allowance (gov.uk income tax rates):

The personal allowance tapers away once your adjusted net income passes £100,000, falling to nil at £125,140.

On top of income tax, self-employed profits attract Class 4 National Insurance for 2025/26 (gov.uk self-employed National Insurance rates):

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270

Class 2 National Insurance is no longer charged as a flat weekly fee, but your NI record is still treated as maintained where your profits are at or above the Small Profits Threshold of £6,845.

Illustrative example. Suppose your eBay business makes £40,000 of taxable profit in 2025/26 as a sole trader.

• Income tax: the first £12,570 is covered by the personal allowance; the remaining £27,430 is taxed at 20% = £5,486.
• Class 4 NI: £40,000 minus £12,570 = £27,430, taxed at 6% = £1,646.
• Total: £7,132.

These are figures from the verified rates table; your own position will depend on your other income and reliefs.

You can sanity-check your own numbers with our self-employed tax calculator.

Limited companies

A company pays Corporation Tax on its profits and files a CT600 return. For Financial Year 2025 (gov.uk corporation tax rates):

• 19% small profits rate where profits are £50,000 or less
• 25% main rate where profits are over £250,000
• Marginal relief smooths the rate between £50,000 and £250,000

You'd then typically pay yourself through a mix of salary and dividends, each taxed separately on your personal return. Getting that mix right is worth proper advice, and it's something our corporation tax service handles for ecommerce clients.

What are the key tax deadlines for eBay sellers? {#key-tax-deadlines-for-ebay-sellers}

Miss a deadline and HMRC penalties follow, so it pays to diarise these.

Self Assessment (sole traders)

For the 2025/26 tax year (6 April 2025 to 5 April 2026), the deadlines are (gov.uk Self Assessment deadlines):

• 5 October 2026 - register for Self Assessment if you're newly self-employed
• 31 October 2026 - deadline for a paper return
• 31 January 2027 - deadline for an online return and your balancing payment, plus any first payment on account
• 31 July 2027 - second payment on account

Corporation Tax (limited companies)

• File your CT600 within 12 months of your accounting period end.
• Pay your Corporation Tax within 9 months and 1 day of the period end (for companies with profits up to £1.5 million). You usually pay before you file.

See the gov.uk Corporation Tax guidance for the detail.

VAT returns

If you're registered, VAT returns are usually quarterly and are due 1 month and 7 days after the end of each VAT period. So a quarter ending 30 June 2026 has a return and payment due by 7 August 2026 (gov.uk VAT return deadlines).

One more on the horizon: Making Tax Digital for Income Tax starts from 6 April 2026 for sole traders and landlords with qualifying income over £50,000 (based on the 2024/25 year). Plenty of eBay sellers will be caught, so it's worth checking now using the gov.uk MTD for Income Tax guidance.

Get your eBay accounting sorted

Running an eBay shop is enough work without the books fighting back. At Zmartly, we look after the accounting for ecommerce sellers across the UK, from managed-payments reconciliation and VAT to your year-end return.

Want a hand? Book a free 20-minute call with a Zmartly accountant and we'll tell you exactly what your eBay business needs, with no jargon and no obligation.

FAQs {#faqs}

Do I need an accountant for my eBay business?

Not always, but most growing sellers benefit. As soon as VAT, multiple marketplaces or limited-company structure come into play, an accountant saves time and usually more than pays for itself by getting your tax and VAT right. If you're a small side-hustle below the trading allowance, you may be fine on your own for now.

Do I have to pay tax on my eBay sales in the UK?

If you're trading (buying or making goods to sell on for profit), yes. Sole traders pay income tax and Class 4 National Insurance on their profit; limited companies pay Corporation Tax. Casual selling of your own unwanted items generally isn't taxable, and there's a £1,000 trading allowance before reporting kicks in.

When do eBay sellers have to register for VAT?

You must register once your taxable turnover passes £90,000 in any rolling 12-month period, the threshold in place since 1 April 2024. You can register voluntarily below that to reclaim VAT on purchases. Overseas sellers selling goods to UK customers generally have no threshold and register from their first UK sale.

Do I report my gross eBay sales or what lands in my bank?

You report gross sales, the full amount buyers paid, before eBay deducts its fees. The fees are recorded separately as a business expense. The net payout in your bank should equal gross sales minus those fees, which is what reconciliation checks.

How do I work out cost of goods sold for eBay?

Use opening inventory plus purchases minus closing inventory. That captures the cost of the stock you actually sold during the period. It includes the cost of the goods and getting them to you, but not eBay selling fees or advertising, which are separate expenses.

How does VAT work on international eBay sales?

For UK stock sold to UK buyers you charge 20% VAT. For goods of £135 or less sent into the UK from overseas, the seller accounts for UK VAT at 1/6th of the sale price. Above £135, import VAT is handled at the border. Selling into the EU may bring OSS or IOSS into play depending on your volumes.

How long do I need to keep my eBay records?

Keep your business records, including eBay reports, fee statements, purchase receipts and bank statements, for at least 6 years. If you're VAT registered you must also keep digital VAT records under Making Tax Digital.