How Do I Do the Accounting for My Shopify or Amazon Shop in 2026/27?

Accounting for a Shopify or Amazon shop comes down to five things: record your gross sales — what customers pay, not what the platform pays out — claim platform fees and stock as allowable expenses, register for Self Assessment once gross trading income passes £1,000, watch the £90,000 VAT registration threshold, and, from 6 April 2026, follow Making Tax Digital for Income Tax if your gross income is over £50,000. Get those five right and the rest is good bookkeeping habit.

Why ecommerce accounting trips sellers up

The biggest mistake online sellers make is bookkeeping from their bank statement. Amazon, Etsy and Shopify (through its payment gateway) pay out net figures: your sales minus selling fees, advertising charges, refunds and sometimes storage costs. HMRC, however, taxes you on your gross sales, with the fees claimed separately as expenses. Book only the payouts and you understate both turnover and costs — which can mean the VAT threshold creeping up on you unnoticed, and under-claimed expenses at the same time.

Three ecommerce-specific habits solve most of it:

• Reconcile monthly settlement reports. Every platform produces a statement showing gross sales, fees and refunds behind each payout. That report — not the bank credit — is your source of truth.
• Track stock properly. You can only deduct the cost of goods actually sold in the year, so a year-end stocktake matters. Unsold stock sitting in your spare room (or an FBA warehouse) is not yet an expense.
• Keep channels separate. If you sell on Amazon, eBay and your own Shopify site, record each channel’s gross sales and fees separately, then combine them for your tax return — the thresholds below apply to the total.

When do I need to register with HMRC?

If your gross trading income — all platforms combined, before any fees — is £1,000 or less in a tax year, the trading allowance usually means you have nothing to report. Once gross sales pass £1,000, you must register for Self Assessment by 5 October after the end of the tax year in which it happened. For sales made in 2026/27, that means registering by 5 October 2027.

Once registered, you pay income tax on profits above the £12,570 personal allowance (20% basic rate on profits up to £50,270 in 2026/27), plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that.

VAT: the £90,000 question

You must register for VAT when your taxable turnover for any rolling 12 months — not your accounting year, and not the tax year — goes over £90,000, or when you expect to pass £90,000 in the next 30 days alone. Remember: that is gross sales, so a shop taking £7,500 a month in customer payments is already at the threshold even if the payouts after fees look much smaller.

Miss the trigger and HMRC can backdate your registration, leaving you to pay VAT out of prices you never added it to. If you cross the threshold in a month, you have until 30 days after the end of that month to register, and you are registered from the first day of the second month after you went over. You can test how the sums work with our VAT and Flat Rate Scheme calculator, and the official rules are in GOV.UK’s VAT registration guidance.

A worked example for 2026/27

Amira runs a Shopify candle shop as a sole trader. Her 2026/27 numbers look like this:

• Gross sales (what customers paid): £48,000
• Stock and materials: £16,500
• Shopify subscription and payment processing fees: £2,900
• Postage and packaging: £4,100
• Software, use of home and accountancy: £2,500
• Taxable profit: £22,000 (£48,000 less £26,000 of expenses)

Her tax bill for 2026/27:

• Income tax: £22,000 − £12,570 personal allowance = £9,430 × 20% = £1,886.00
• Class 4 National Insurance: £9,430 × 6% = £565.80
• Total: £2,451.80, payable through Self Assessment by 31 January 2028

Two threshold checks: her £48,000 turnover is under £90,000, so no VAT registration yet — though she should watch the rolling 12-month total rather than wait for year-end. It is also under £50,000, so Making Tax Digital does not yet apply to her (see below). Try your own figures in our ecommerce profit calculator.

Making Tax Digital from April 2026

From 6 April 2026, sole traders whose qualifying income — gross self-employment plus property income, before expenses — is over £50,000 must keep digital records and send HMRC quarterly updates through MTD-compatible software, with lower income bands following in later years. Note that the test is turnover, not profit: a seller with £60,000 of gross sales and £10,000 of profit is still in. HMRC began signing up mandated taxpayers automatically from September 2026, so if that is you and you have not chosen software yet, make it this month’s job.

What records should an online seller keep?

• Monthly settlement or payout reports from every platform;
• Purchase invoices for stock, and a year-end stocktake valuation;
• Receipts for postage, packaging, software and advertising;
• A record of any goods taken for personal use;
• Mileage logs for trips to the post office or suppliers.

Keep them digitally — Making Tax Digital will require it sooner or later anyway. And if the bookkeeping side has outgrown your spreadsheet, our small business accounting service handles the reconciliations, returns and deadlines for you.

Frequently asked questions

Is the VAT threshold based on my payouts or my gross sales?

Gross sales. Taxable turnover means the full amount your customers pay, before Amazon, Etsy or Shopify deduct their fees — so many sellers reach £90,000 months earlier than their bank statement suggests.

Can I use the £1,000 trading allowance and still claim expenses?

No — it is one or the other. If gross sales are over £1,000 you deduct either the £1,000 allowance or your actual costs, whichever gives the better result. For an established shop, real costs such as stock, fees and postage are almost always far higher than £1,000.

Does Making Tax Digital apply to my online shop?

From 6 April 2026 it applies if your qualifying income is over £50,000, measured on gross income before expenses. You will need MTD-compatible software and quarterly updates. Below that, you carry on with the normal Self Assessment return for now.

Written by the Accountactical Team — ACCA-Approved Accountants, London.

This article is general information for UK small businesses, not formal tax advice. Speak to an accountant about your own circumstances before acting on it.