Proper eBay accounting starts with getting your stock numbers right, and cost of goods sold is one of the most misunderstood parts of running an eBay business. Good inventory management sits at the heart of this. We work out your opening stock, purchases during the year, and closing stock to calculate what your goods sold actually cost you, not just what you paid for them upfront.

Why Bundles, Bulk Stock and Unsold Inventory Complicate the Numbers

This gets more complicated with bundles, multi-item purchases, stock bought in bulk, and stock you already owned before you started trading. Damaged or obsolete stock needs to be accounted for too, because unsold inventory sitting in a spare room still affects your taxable profit even though it has not been sold yet, which is exactly why accurate accounting for stock matters so much and why your financial reporting needs to reflect it properly.

Get this wrong, and your tax return can show a profit figure that has nothing to do with the cash actually sitting in your account. Get it right, and you know your real profit margins on every line you sell, which also supports better cash flow management since you know what stock is actually costing you before you reorder.

The VAT registration threshold currently sits at £90,000 of taxable turnover, and for a growing eBay seller that figure can creep up faster than expected once you count gross sales across the whole year rather than just profit. We monitor your turnover so you register for VAT at the right time, not late and not unnecessarily early, so you always know what you need to pay VAT on and when.

Once you are VAT registered, we take care of ongoing compliance, including VAT on marketplace sales, the difference between domestic and EU sales, and how VAT-inclusive pricing affects your margins. For certain second-hand and collectible goods, a VAT margin scheme can also make a real difference to what you owe, so we look at whether that applies to your stock rather than defaulting to the standard rules.

Selling Overseas Brings Its Own VAT Compliance Questions

Selling into the EU, the US, Australia or Canada brings EU VAT, import VAT, customs paperwork and export evidence into the picture. If you ship into American states, US sales tax rules can apply too, so we check whether that affects you. We help you navigate VAT compliance across each market you sell into, including how currency conversion and foreign exchange gains or losses should be treated in your accounts, and what changes when you hold stock overseas for faster international sales.

Making Tax Digital for Income Tax began on 6 April 2026 for sole traders and landlords with qualifying income above £50,000, with the threshold dropping to £30,000 in April 2027 and £20,000 in April 2028. HMRC estimates around 864,000 individuals fall into that first wave, and across the wider self assessment population, roughly 7.02 million people had self-employed or landlord income in 2023/24, with around 2.9 million expected to be pulled into MTD as the thresholds fall.

For an eBay seller, that means digital record-keeping and quarterly updates rather than one big tax return once a year, and knowing exactly when you pay tax throughout the year rather than facing one large bill in January. This is a core part of eBay accounting once Making Tax Digital applies to you. We set you up with cloud accounting software that connects to your eBay account, handles the quarterly submissions, and makes sure you are ready well before the threshold catches up with you rather than scrambling at the last minute.

Full refunds, partial refunds, cancelled orders and returned stock all need to be handled differently in your accounts, and getting it wrong overstates your profit and your tax bill. We also account for situations where you keep the postage cost on a refund, where eBay refunds its own fees, and where returned stock arrives back damaged and cannot be resold.

Customer disputes add another layer, since the outcome can affect both your sales figures and your stock records at the same time. We build all of this into your bookkeeping as it happens, using the eBay accountants at Vexo Accounting who already understand how eBay's dispute process works, rather than trying to reconstruct it at year-end.

There is no single profit level at which becoming a limited company automatically makes sense, whatever some online calculators suggest. We look at your actual tax position, National Insurance, how you would split income between salary and dividends, and your appetite for risk. Whether you plan to reinvest profits or take them out of the business shapes this decision too, alongside strategic tax planning and the practical side of Companies House filing.

Growth plans, business growth more generally, and whether you intend to employ staff also matter here. For some eBay sellers, staying a sole trader for longer is genuinely the better call, tax efficiency included, and we will tell you that plainly rather than pushing incorporation because it suits us better than it suits you.

Corporation Tax and Companies House Once You Incorporate

Once you incorporate, we handle corporation tax filings and ongoing corporation tax planning alongside your annual accounts, so nothing falls through the gap between one filing and the next. We also keep your Companies House record up to date and always aim for the most tax-efficient structure for your actual situation, not a generic recommendation.

Many eBay accountants charge by the hour without telling you upfront, which makes budgeting difficult. Our accounting services are priced clearly instead, so you know what you are paying before any work starts.

Sole trader eBay sellers with fairly straightforward business expenses are typically looking at somewhere between £35 and £90 a month, or roughly £300 to £900 a year, for ongoing bookkeeping support alongside a self assessment tax return. Once you are VAT registered or trading through a limited company, monthly fees tend to sit higher, usually between £90 and £250, depending on transaction volume and how many reconciliations we are running each month.

This is a rough guide based on recent projects, and the actual cost varies depending on your turnover, your record-keeping, and exactly which services you need. The clearest way to get an accurate figure for your own eBay business is a free consultation with our accountancy firm, where we look at your actual numbers before quoting anything, with transparent pricing and no hidden fees.