Ecommerce business expenses in the UK: the complete guide for online sellers

An online seller’s ledger looks simple from the outside (stock in, orders out, fees in between) and is full of VAT traps on the inside. Stock bought abroad carries import VAT that is reclaimed from a customs document, not a supplier invoice. Fees from platforms billing from outside the UK carry no VAT on the invoice but a reverse charge on your return. Low-value parcels are taxed at the point of sale, sometimes by the marketplace instead of you. And exports are zero-rated only with evidence. This guide goes through the whole ledger of a UK ecommerce business, category by category, with a verdict for each one before the detail. Every figure is sourced to HMRC or GOV.UK in the Sources section, retrieved 10 October 2026.

What this guide covers: stock and cost of sales, import VAT and postponed accounting, the £135 rule and marketplaces, marketplace, processor and app fees, the reverse charge, shipping, packaging and fulfilment, advertising, exports, equipment and software, staff and mileage, and the VAT, records and year-end work that tie it together.

The online seller’s ledger at a glance

The rest of this guide walks through each row, and every section opens with its verdict.

Where ExpenseFlow fits

An online seller’s purchase ledger is supplier invoices, freight and customs bills, monthly platform statements, app subscriptions and ad spend, much of it in foreign currency. ExpenseFlow captures each document (email forward, upload or phone), reads the line items, the currency and the VAT, codes each line to your chart of accounts with a written reason, and routes anything uncertain to a person before it posts. Its ecommerce checks are built from the rules on this page: marketplace and payment-processor fee lines are coded as operating expenses, not cost of goods sold, and flagged for the reverse charge when the platform bills from abroad; an invoice from an overseas supplier of goods is flagged because its VAT is reclaimed from the import VAT statement or C79, not from the invoice; a foreign supplier’s local tax is flagged as not reclaimable in the UK; and the line-level VAT is recomputed against the totals. After approval the bill syncs to Xero with the source document attached, or to QuickBooks Online as a coded bill.

What it does not do: it does not reconcile marketplace payouts to orders, value stock, decide whether a sale is zero-rated, or file your VAT return. The ecommerce chart of accounts for Xero and for QuickBooks line up with the categories below.

The ExpenseFlow for online sellers page covers these checks across all five countries.

Stock and cost of sales

Goods bought for resale, inbound freight and import duty make up the cost of the stock. Unsold stock at the year end is valued on an acceptable basis, normally the lower of cost and net realisable value ^[6] , so slow-moving or damaged stock can be written down to what it will realistically fetch. Marketplace fees, processor fees and outbound postage are selling costs, not part of stock cost.

Import VAT and postponed accounting

Accounting for import VAT on your VAT return means you declare and recover import VAT on the same return ^[2] . Your business must be VAT registered, and no approval is needed; the import then appears on your monthly postponed import VAT statement, which you download online ^[2] . HMRC advises checking your import VAT certificate (C79) and postponed VAT account statements in the Customs Declaration Service to make sure all imports are covered ^[2] . The supplier’s invoice from abroad shows no UK VAT and supports none.

The £135 rule and marketplaces

For consignments worth £135 or less sent directly to customers in Great Britain and not sold through an online marketplace, the seller must charge and account for VAT at the point of sale; the limit applies to the whole consignment, not each item, and a business customer who gives a UK VAT number accounts for the VAT itself ^[1] . Consignments over £135 follow normal import VAT and customs rules ^[1] . Where the sale goes through an online marketplace, the marketplace must charge and account for the VAT at the point of sale on consignments of £135 or less; and where an overseas seller’s goods are already in the UK when sold through a marketplace, the seller is treated as making a zero-rated deemed supply to the marketplace ^[7] .

Marketplace, processor and app fees, and the reverse charge

The reverse charge applies to almost all business-to-business services received from suppliers belonging outside the UK, except exempt supplies: you credit your VAT account with output tax on the full value of the supply and debit it with the input tax you are entitled to, entering the VAT in Box 1 and Box 4 and the full value in Boxes 6 and 7 ^[3] . For a fully taxable seller it costs nothing net, but it must be on the return. If you are not yet registered, the value of those services is added to your own taxable supplies when deciding whether you must register ^[3] , which can push a fast-growing store over the £90,000 threshold ^[8] earlier than its sales alone would. Fees billed from a UK entity carry ordinary VAT you reclaim from the invoice. The software and subscriptions guides cover the deductibility side.

Shipping, packaging and fulfilment

Outbound postage, courier accounts, third-party fulfilment fees and packaging materials are ordinary costs of selling. Reclaim the VAT shown on each VAT invoice, and use the reverse charge where a fulfilment provider bills from abroad ^[3] .

Advertising and marketing

Paid search, social ads, influencer fees and email platforms are deductible marketing costs; most large ad platforms bill UK businesses from an overseas entity, so the reverse charge applies ^[3] . Free products sent to influencers are a marketing cost at their stock cost.

Exports

The supply of exported goods is zero-rated provided the conditions in Notice 703 are met, and you must export the goods and get valid evidence of export within the time limits in the notice ^[4] ; for most direct exports that is 3 months from the time of supply. A courier’s proof of delivery abroad and the commercial invoice are the usual evidence; without it, the sale is standard-rated.

Equipment, software and the home office

The Annual Investment Allowance gives relief on most plant and machinery up to £1 million a year ^[5] , covering the kit an online store runs on. The equipment guide covers the pools, and the home office guide the costs of working from home.

Staff, mileage and payroll

From 1 April 2026 the National Living Wage is £12.71 an hour for workers 21 and over ^[9] , employer National Insurance is 15% above £96 a week in 2026-27 ^[10] , and eligible employers reduce it by up to £10,500 a year through the Employment Allowance ^[11] . Trips to the post office, suppliers and trade shows by car are claimed at 55p a mile for the first 10,000 miles from 6 April 2026 and 25p after ^[12] .

VAT registration, records and year end

You must register for VAT when your taxable turnover for the last 12 months goes over £90,000, or will within the next 30 days ^[8] . Keep the monthly postponed import VAT statements and C79s ^[2] , the export evidence for zero-rated sales ^[4] , and the platform statements behind every reverse-charged fee. Business records are kept for six years, as the record-keeping guide sets out; the UK VAT and MTD guide, VAT return guide and year-end checklist cover the rest.

Common mistakes

• Reclaiming import VAT from an overseas supplier’s invoice instead of the import VAT statement or C79 ^[2] .
• Leaving reverse-charged platform and ad fees off the VAT return ^[3] .
• Forgetting that reverse-charged services count toward the registration threshold ^[3] .
• Charging VAT on a sub-£135 marketplace sale that the marketplace already accounted for ^[7] .
• Testing the £135 limit per item instead of per consignment ^[1] .
• Zero-rating exports without evidence of export ^[4] .
• Putting marketplace fees into cost of goods sold.
• Valuing slow stock at cost when it will sell for less ^[6] .