eBay and VAT: What UK Sellers Need to Know About Profit

This is general information, not tax advice. Speak to an accountant or check HMRC's guidance for your situation.

When VAT applies

In the UK you must register for VAT once your taxable turnover goes over the registration threshold, which was £90,000 at the time of writing, and you can register voluntarily below that. Check HMRC for the current figure.

Why VAT changes your profit

If you are VAT registered, part of what the buyer pays belongs to HMRC. The money you actually keep is lower than the headline sale price, and eBay fees are calculated on the VAT-inclusive total. If you ignore that, your profit looks better than it really is.

Standard VAT accounting

You charge VAT on sales and reclaim VAT on business purchases. For profit purposes you work with prices excluding VAT for both sales and costs where you can reclaim the VAT.

The Flat Rate Scheme

Under the Flat Rate Scheme you pay HMRC a fixed percentage of your VAT-inclusive turnover and generally cannot reclaim VAT on most purchases. The percentage depends on your trade sector, and a higher rate can apply if you are classed as a limited cost trader, so check the current rates on GOV.UK.

Working out profit with VAT

Take the VAT-inclusive sale total, subtract the VAT you owe (standard) or the flat-rate amount, subtract eBay fees, item cost, postage and packaging, and subtract refunds.

SellerLens supports VAT-registered sellers on both the Standard and Flat Rate schemes, so the profit you see already accounts for the VAT you owe. Try it free for 7 days, no card required.