Ask an accountant
The questions online sellers actually ask, answered the way they would be answered on a call: the short answer first, then why, then the free tool if there is one. Rates are those applying in 2026/27.
36 questions, answered plainly
If your total income from selling is over £1,000 in a tax year, yes, even if you made no profit. The trading allowance is measured on income, not profit, so £3,000 of sales that cost you £2,800 means registering despite earning £200. Below £1,000 you can leave it.
Clearing out your loft is not trading. Buying things in order to sell them is, from the first sale. HMRC looks at whether you buy to resell, how often, whether you modify or repackage, how quickly you sell, and whether you advertise. Most people asking this question already know the answer.
Usually, no. Starting as a sole trader can be simpler and, at lower profit levels, may also be more tax-efficient. There is not one profit level at which a limited company automatically becomes better. It depends on how much profit the business makes, how much you need to withdraw personally, your other income and whether you can leave some profits in the company. As profits grow, it is worth comparing the two structures based on your actual circumstances rather than incorporating simply because the business has reached a particular turnover or profit figure.
If you run a limited company, keep the company money separate from your personal finances. For a sole trader, a separate business account is generally not a legal requirement, but it is still good practice. Keeping business income and expenses in one account makes bookkeeping, bank reconciliation and tax reporting considerably easier, and means fewer personal transactions to explain when your accounts are prepared.
If you are a sole trader, you generally need to register for Self Assessment by 5 October following the end of the tax year in which you started trading. If you run a limited company, you need to tell HMRC within three months of the company becoming active for Corporation Tax. This may be later than the date you incorporated, if the company was initially dormant.
When your taxable turnover passes £90,000 in any rolling twelve months. Not your financial year and not the tax year: any twelve consecutive months, tested at the end of every month. You then have thirty days from that month end to tell HMRC, and registration takes effect from the first day of the second month after.
No. The £90,000 VAT threshold is based on your VAT-taxable turnover, not simply the amount that Amazon, Shopify or another platform pays into your bank after deducting its fees. For example, if you make £100,000 of taxable sales and the platform deducts £15,000 in fees before paying you £85,000, you should not use the £85,000 payout as your turnover for the VAT threshold. This is why e-commerce sellers need to track the underlying sales transactions rather than relying only on marketplace payouts or bank deposits.
Yes. What buyers pay you for delivery is your income, not a cost, and it is part of taxable turnover. On a business charging four per cent for postage that is nearly £4,000 of threshold on £90,000 of product sales.
VAT registration does not automatically mean you have to increase your prices. But if your sales are subject to 20 per cent VAT and you keep your customer-facing prices unchanged, part of the price you currently retain becomes VAT payable to HMRC. For example, if you continue selling a product for £120 after VAT registration, £20 of that price is VAT, leaving £100 of net sales before costs. Whether you should increase your prices depends on your margins, customers and competitors, as well as the VAT you can reclaim on your business costs.
Yes, within limits. Goods you still hold at registration, going back four years, and services going back six months. It is frequently missed on the first return and is often worth a great deal for a seller who holds stock.
Possibly. A marketplace collecting VAT on your sales does not automatically remove your VAT registration obligations. The answer depends on where your business is established, where your stock is held, who you sell to and how the marketplace sale is treated for VAT purposes. For overseas sellers, marketplace rules can make the platform responsible for VAT on certain consumer sales. However, you may still need, or choose, to remain VAT registered, for example because of other UK sales or to recover eligible import VAT. If you hold stock or sell across several countries, check your VAT registration position in each country separately.
Potentially, yes. Holding stock in Germany can create a German VAT registration requirement, particularly where goods are sold or moved from that stock. The UK VAT registration threshold does not determine whether you need to register in Germany. Your obligations depend on how your goods are stored, moved and sold, as well as the fulfilment arrangements you use. If you hold inventory outside the UK, check the VAT position for each country in which your stock is stored.
It can reduce fulfilment costs, but lower Amazon fees do not automatically mean higher profit. Pan-European FBA allows Amazon to store your inventory across selected EU countries, which can bring local fulfilment rates but may also create additional VAT registration, filing and compliance obligations. Before enabling it, compare the expected fulfilment savings with the additional VAT and compliance costs for the countries where your stock will be stored. The right choice depends on your sales volume, products, margins and existing VAT registrations.
Because between the two sit the referral fee, the fulfilment fee, storage, advertising, refunds and the cost of the goods. On a typical Amazon account the platform alone takes over half of turnover once advertising is counted, before you have paid for a single unit.
Your break-even ACoS is your contribution as a percentage of the selling price. Nothing more. On a £24.99 product leaving £5.02 it is 20.1 per cent, and every point above that comes out of your pocket. Comparing ACoS to your gross margin instead is what funds unprofitable advertising.
Yes, it can. If you keep your selling price unchanged after VAT registration, part of that price becomes VAT payable to HMRC, which can reduce the margin available for advertising. However, VAT registration may also allow you to reclaim VAT on eligible business costs. The overall effect on your break-even ACoS therefore depends on your selling price, costs, Amazon fees and the VAT you can recover. Recalculate your break-even ACoS after VAT registration rather than assuming your previous advertising target still applies.
Almost never once your time is costed. On a typical order self-fulfilment saves about 24p a unit before your labour, which at six minutes an order is £2.41 an hour. Set your hourly rate to zero and it wins; set it to anything realistic and it does not.
Usually the product mix moved towards heavier or cheaper items, which pay proportionally more in fulfilment and referral. Sometimes a unit has been remeasured into a larger size tier. Both are invisible in a monthly total and obvious in a fee load percentage tracked month by month.
Turnover. What the buyer pays for delivery is income, and what you pay the carrier is a cost. Netting them off understates both, hides whether your postage is priced correctly, and understates your VAT threshold position.
Landed cost is what a unit costs by the time it reaches you: supplier price plus freight, duty, clearance and handling. A supplier invoice alone commonly understates it by a third, so prices set off the invoice are quietly too low on every single sale.
Yes. It is yours wherever it physically is: your shelves, a fulfilment centre, a third-party warehouse, or on a ship if title has already passed to you. The only thing you exclude is stock held on consignment that you have not bought.
No. Stock you still hold is generally recorded as inventory rather than immediately treated as a cost of sale. The cost is recognised when the goods are sold. Your cost of goods sold is broadly calculated as opening stock plus purchases less closing stock. This is why buying a large amount of inventory can reduce your cash without reducing your accounting profit by the same amount.
Stock that is damaged, obsolete or can no longer be sold at its original price may need to be written down. Inventory is generally valued at the lower of its cost and its net realisable value: broadly, what you expect to recover from selling it after any further costs needed to make the sale. If its value has fallen below cost, the difference is recognised as an expense, reducing the value of your inventory and your profit. The stock does not necessarily have to wait until it is physically disposed of before a genuine loss in value is recognised.
There is an actual answer. Bigger orders spread the freight and cost more in storage, so total cost per unit has a minimum. On a typical shipment it lands around 1,068 units, and ordering 2,000 to get the freight rate down costs 39p a unit more and ties up twice the cash.
More than the monthly rate suggests. A unit sits for half its months of cover on average, so storage per unit sold is the monthly rate times half your cover. Eighteen pence a month becomes forty-five pence a unit sold at five months of stock.
Because a payout is a settlement of many transactions, not a sale. It nets a fortnight of sales against fees, refunds, chargebacks, advertising and any movement in the reserve. Booking the deposit as turnover understates your sales and makes your costs disappear entirely.
Move a fixed percentage of every payout into a separate account on the day it arrives, rather than working it out at the year end. The percentage depends on your structure and profit, but the discipline matters more than the number, and the account has to be a different one.
Sole traders keep records five years after the 31 January filing deadline, which is nearly six years after the tax year ends. Companies keep six years from the period end. VAT records six years. If you sell into the EU through the One Stop Shop, ten.
Yes, for almost everything, provided the copy is legible, complete and findable. Thermal till receipts fade to blank within months, so photograph them the day you get them. A bank statement is not a receipt: it proves money moved, not what it bought.
It is fixable rather than fatal. Every transfer in either direction needs an explanation, so the sooner you separate them the less unpicking there is. The costs are still deductible if they were genuinely for the business and you can evidence them.
No. A reserve is still your money and sits on your balance sheet as an asset. A rising reserve is a cash flow problem rather than a profit one, which is why it belongs in a forecast and not in your profit and loss account.
For a sole trader, 31 January after the tax year, with a second payment on 31 July if payments on account have started. For a company, corporation tax nine months and a day after the year end, which is before the return that calculates it is due at twelve months.
Payments on account. Once a bill passes £1,000 you pay it plus half of it again on the same day, then the other half in July. A first bill of £4,011 becomes a January payment of £6,017 with nothing having changed about the business.
If you are a company, yes, and usually a small one alongside dividends. A salary is deductible for the company and carries National Insurance above £5,000 for the employer. Sole traders cannot pay themselves a salary at all: the profit is already yours and already taxed.
If it is not salary, dividends or expenses, it is a loan. Left overdrawn nine months and a day after the year end, the company pays 35.75 per cent of the balance, refundable only when the loan is repaid. Balances over £10,000 also create a benefit in kind.
Penalties, and interest that runs from the original due date regardless. Corporation tax is the one people miss, because the money is due three months before the return that works it out. Filing something approximate on time beats filing something perfect late.
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