Common Ecommerce Accounting Mistakes UK Businesses Should Avoid

Running an ecommerce business in the UK is fast-paced, competitive and often complex especially when it comes to accounting. With multiple sales channels, digital tools and tax regulations to consider, it’s easy to slip up. But accounting errors can lead to cash flow problems, HMRC penalties, or even long-term financial instability.

Whether you’re selling on Shopify, Amazon, Etsy or your own website, this guide outlines the most common ecommerce accounting mistakes and how to avoid them in 2025/26.

1. Not Registering for VAT at the Right Time

One of the biggest issues ecommerce sellers face is VAT. Many delay registering, thinking they don’t need to until they hit the £90,000 VAT threshold (correct for the 2025/26 tax year). However, if you’re importing goods or using EU fulfilment centres (like Amazon’s PAN-EU programme), you may need to register earlier.

What to do:

• Monitor your rolling 12-month turnover.
• Consider voluntary registration if you’re close to the threshold or want to reclaim VAT on purchases.
• Learn more on GOV.UK’s VAT guidance.

2. Mixing Personal and Business Finances

Many small ecommerce business owners start off by using a personal bank account. Over time, this creates a tangled mess when trying to separate business expenses and calculate profits.

What to do:

• Open a dedicated business bank account.
• Use accounting software that links to your account and categorises income and expenses.

3. Failing to Track Inventory Properly

Inventory management is one of the trickiest parts of ecommerce accounting. Not accounting for stock movements means inaccurate profit figures and potential VAT reporting issues.

What to do:

• Use platforms like QuickBooks Commerce, Xero, or A2X (especially for Amazon or Shopify sellers).
• Regularly reconcile your stock levels with your sales records.
• Record cost of goods sold (COGS) correctly not just what you’ve spent, but what has actually been sold.

4. Not Reconciling Sales Platform Fees

Marketplaces like Amazon, eBay, and Etsy deduct fees before they deposit your revenue. If you only record the net amount received, your accounts will understate both income and expenses.

What to do:

• Use tools like A2X or Link My Books to pull in gross sales, refunds, and fees automatically.
• Ensure your accounting reflects total sales, payment processing charges, commission, and VAT where applicable.

5. Incorrect VAT on International Sales

Post-Brexit, selling to the EU has become a VAT minefield. If you’re using EU fulfilment centres, importing from outside the UK, or shipping DDP (Delivered Duty Paid), your VAT obligations can become complex.

What to do:

• Check whether you need EU VAT registration (especially for sales over €10,000).
• Use Import One Stop Shop (IOSS) or UK VAT OSS where eligible.
• Consult HMRC’s guidance on international VAT.