The money that lands in your bank from TikTok Shop is already net of platform fees, commission and refunds. It is what's left after TikTok takes its cut, not what you sold.
If you record that bank deposit as your turnover, you'll understate your sales. That matters more than it sounds. Your gross sales drive your VAT registration test, your trading allowance test, and what HMRC's figures will say about you. Get the top line wrong and everything downstream is wrong too.
This guide shows you exactly what to record: gross sales as turnover, fees as an expense, and refunds as a reduction in sales. It's written for sellers running a shop in the UK, and there's a worked illustrative example and a VAT-return-box walkthrough so you can see the numbers line up.
Why isn't the TikTok Shop payout your turnover?
Your turnover is the full value of what you sold to customers. Your payout is that figure after TikTok deducts its commission, transaction fees and any refunds it has already processed. They're two different numbers, and only the first one is your turnover.
Think of the payout as the answer to a sum that has already happened. TikTok collects the customer's full payment, subtracts its fees and any refunds, then sends you the balance. By the time you see it, the gross sale has been blurred into a net figure.
For your accounts and your tax return, you need to unpick that. HMRC wants your sales recorded gross, with fees and refunds shown separately. Netting everything down to the payout hides information HMRC's rules actually depend on.
What counts as turnover for HMRC?
Your turnover is the gross value of your sales before you take off any fees, commission or other costs. You record the full sale, then deduct allowable expenses such as platform fees separately to reach your taxable profit.
HMRC's own example puts it plainly: "if your turnover is £40,000 and you claim £10,000 in allowable expenses, you'll only pay Income Tax on the remaining £30,000, known as your taxable profit" (see GOV.UK on expenses if you're self-employed). The fees come off as an expense. They never reduce the turnover figure itself.
This holds whichever accounting method you use. Since 6 April 2024 the cash basis is the default for most sole traders, and under it you "only record income or expenses when you receive money or pay a bill". Even then, the income you record is the gross sale value, not the trimmed-down payout.
So if a customer pays £30 for an item, your turnover from that sale is £30. The fact that TikTok forwards you perhaps £24 after its cut doesn't change the £30. The missing £6 is a fee you record as an expense.
How should I record gross sales, fees and refunds?
Use your TikTok Shop financial reports, not your bank statement, as the source for your books. The reports break the payout back down into the components HMRC wants to see. Record each of the three the right way:
- Gross sales (turnover). The full amount customers paid for goods, before any deduction. This is your top line.
- Platform fees and commission (expense). TikTok's selling fees, transaction fees and commission are allowable business expenses. Record them as costs, not as a reduction of sales.
- Refunds (reduction of sales). When you refund a customer, you reduce your sales by the refunded amount. A refund is not an expense, it cancels part of a sale.
The simplest discipline is to reconcile every payout. Take the deposit that hit your bank, then work backwards: gross sales, minus fees, minus refunds, should equal the payout. If it does, your books capture the full picture and your turnover is right.
Doing this monthly keeps it manageable and means your VAT and self-assessment figures are always ready. If you'd rather hand the reconciliation over, this is exactly the kind of work our bookkeeping service does for ecommerce sellers.
A worked example: deposit versus turnover
Illustrative example. Maya runs a TikTok Shop selling phone accessories as a sole trader. In one month her TikTok financial report shows the following, and a single payout of £4,150 lands in her bank.
| Line item | Amount |
|---|---|
| Gross sales (customer payments) | £5,000 |
| Platform fees and commission | (£600) |
| Customer refunds | (£250) |
| Net payout to bank | £4,150 |
If Maya recorded the £4,150 deposit as her turnover, she'd be understating her sales by £850 for that month alone.
Recorded correctly, the same month looks like this:
- Turnover: £5,000
- Less platform fees (expense): £600
- Less refunds (reduction of sales): £250
Her sales figure for the books is £5,000 gross. After the £250 of refunds, her net sales are £4,750. The £600 of fees is an allowable expense that further reduces her taxable profit, but it never touches the sales line. The arithmetic checks out: £5,000 minus £600 minus £250 equals the £4,150 that reached her bank.
Over a year at this rate, the gap between deposit and turnover is around £10,200. That is the difference that can quietly push someone over a threshold they didn't realise they were near.
Why does this matter for the £1,000 trading allowance?
You can earn up to £1,000 of trading income tax-free under the trading allowance, and the £1,000 is measured on gross income, before any fees or expenses come off.
GOV.UK is explicit: "Gross income means the total amount you would put on your tax return before any allowances or expenses are taken off." So if your gross trading income goes over £1,000, you "must tell HMRC" and "register for Self Assessment".
This is where netting down to your payout can catch people out. Imagine gross sales of £1,100 with £200 of TikTok fees. The payout might be around £900, under the allowance. But the figure that counts is the £1,100 gross. That's over the £1,000 limit, so you'd need to register and report, even though less than £1,000 reached your bank.
The rule applies to everything you do that counts as trading. If you also earn from content, the combined gross counts toward the single £1,000 allowance. Selling and creating often go hand in hand, so our guide for TikTok creators is worth a read alongside this.
Why does this matter for VAT registration?
You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12-month period, or when you expect to pass £90,000 in the next 30 days alone. That threshold is for the 2025/26 tax year.
Crucially, taxable turnover is measured on gross sales, not on your payouts. As HMRC puts it, the test looks at "your total taxable turnover for the last 12 months". A seller tracking only their bank deposits will think they're comfortably below £90,000 long after their gross sales have crossed it.
Go back to Maya's £5,000-a-month gross. That's £60,000 a year, well under the threshold. But her payouts of around £4,150 a month total under £50,000, so if she watched only her bank she'd have an even bigger cushion in her head than she really has. Now scale her up to a stronger £8,000-a-month gross: that is £96,000 a year and over the threshold, while her payouts might still look like a sub-£90,000 business. Tracking the deposit hides the moment you should have registered.
The 12-month test is a rolling window, not your accounting year, so you have to watch it month by month. If you're approaching the line, our VAT-aware bookkeeping keeps a running total so you register on time rather than late.
How do TikTok Shop sales show up on a VAT return?
Once you're VAT registered, the gross-versus-net distinction shows up directly in your return boxes. Here's how TikTok Shop sales and the three line items map across, based on how to fill in your VAT return.
| VAT return box | What it captures | TikTok Shop treatment |
|---|---|---|
| Box 1 | VAT due on your sales (output tax) | The 20% VAT on your standard-rated sales, less the VAT on refunds and credit notes you issue |
| Box 6 | Total value of sales, excluding VAT | Your gross sales value with VAT stripped out, reduced by refunds |
| Box 4 | VAT you can reclaim on purchases (input tax) | The VAT element of TikTok's fees, if charged with UK VAT and supported by a valid invoice |
| Box 7 | Total value of purchases, excluding VAT | Your costs including platform fees, excluding VAT |
Two points trip sellers up. First, Box 6 is your sales value excluding VAT, so for standard-rated goods you back the 20% out of the gross figure, you don't use the payout. Second, refunds reduce your output tax: HMRC tells you to "deduct any VAT on credit notes issued by you" when you complete Box 1, and to make the matching adjustments for credit notes you've issued (see record keeping, VAT Notice 700/21).
The standard VAT rate is 20% for 2025/26. Note that TikTok's fees never appear in your sales boxes. They sit in Box 7, and their VAT, if any, sits in Box 4. Folding fees into your sales figure is one of the most common ecommerce VAT errors we unwind.
What does TikTok report to HMRC about me?
Under the digital platform reporting rules, TikTok shares seller information with HMRC. A platform reports your details if, in a calendar year, you make 30 or more sales of goods and your income through the platform is at least €2,000, which is around £1,700 (see selling goods or services on a digital platform).
The report is sent to HMRC by 31 January, and you should get a copy of the same information. It shows the total you earned on the platform, with fees and commission identified, which is another reminder that HMRC sees your gross activity, not just your payouts.
Being reported does not automatically mean you owe tax. As GOV.UK notes, "reporting doesn't automatically mean tax is owed", and you only pay tax if you're trading or making capital gains. But if you are running a shop, you are almost certainly trading, so keeping your gross sales, fees and refunds straight is what lets your own figures match what HMRC already holds.
One extra wrinkle if you import stock: for goods sent to UK customers in consignments valued at £135 or less from outside the UK and sold through an online marketplace, the marketplace is liable for the VAT at the point of sale, not you. That changes who accounts for the VAT, so it's worth confirming how your specific setup is treated before you file.
Frequently asked questions
Is my TikTok Shop payout the same as my turnover?
No. Your payout is net of TikTok's fees, commission and refunds. Your turnover is the gross value of what customers paid before any of those deductions. Record the gross sale as turnover and the fees as a separate expense.
Where do I find my gross sales on TikTok Shop?
Use your TikTok Shop financial or settlement reports rather than your bank statement. The reports break each payout down into gross sales, fees and refunds, which are the figures HMRC's rules rely on. Your bank only shows the net amount that arrived.
Are TikTok Shop fees tax deductible?
Yes. Platform fees, commission and transaction fees are allowable business expenses. You deduct them to work out your taxable profit, but you record them as costs, not as a reduction of your sales figure.
How do I record a refund from my TikTok Shop?
A refund reduces your sales by the refunded amount, it is not an expense. If you're VAT registered, you also reduce your output tax in Box 1 by the VAT on the refund or credit note, and your sales value in Box 6 falls accordingly.
Does the £1,000 trading allowance use my payout or my gross sales?
It uses your gross income before expenses. If your gross trading income goes over £1,000 in a tax year, you must tell HMRC and register for Self Assessment, even if your payouts after fees came to less than £1,000.
When do I have to register for VAT as a TikTok Shop seller?
When your taxable turnover, measured on gross sales, exceeds £90,000 in any rolling 12-month period, or when you expect to pass £90,000 in the next 30 days. That is the 2025/26 threshold. Watch the rolling total, not your bank deposits.
Talk to an e-commerce accountant →
Want this handled properly?
If you're not sure your TikTok Shop figures are landing in the right place, we can set up your bookkeeping so gross sales, fees and refunds are recorded correctly and your VAT and trading-allowance thresholds are tracked automatically. Book a call with a Zmartly accountant through our TikTok creators and sellers page.
