← Back to Blog

75% UK Ecommerce Sellers Get VAT & Bookkeeping Wrong

75% UK Ecommerce Sellers Get VAT & Bookkeeping Wrong

Are you confident your UK eCommerce bookkeeping is accurate?

A surprising 75% of sellers are getting it wrong, even when they handle it themselves or pass it to an accountant.

Most sellers think the only reason to use software is to save time.

But based on real user data from Link My Books, the bigger issue is accuracy.

Claim Free Trial of Link My Books + Coupon Code VOVA20 To Get 50% OFF for 3 Months

In this guide, I’m going to walk you through what’s actually going wrong, especially with VAT, and why fixing this matters more than just speed.

If you want accurate VAT reporting and peace of mind, this is where things start to click.

Why Most Sellers Think Their Bookkeeping Is Fine

Most UK sellers fall into one of these patterns:

  1. Do everything manually

  2. Hand it off to an accountant

  3. Look for tools just to make things faster

If you work with an accountant or bookkeeper, this article gives useful context: Which Accountants & Bookkeepers Use Link My Books for Ecommerce?

On the surface, everything seems fine.

But what I’ve seen again and again is this.

The process might feel smooth, but the numbers underneath are often wrong.

The 75% Problem: What the Data Actually Showed

When 100 users came into Link My Books, their accounts were reviewed.

75 out of those 100 sellers had bookkeeping errors.

Not small ones either.

We’re talking about:

  1. Over-declaring or under-declaring VAT

  2. Not reclaiming VAT on fees

  3. Recording completely incorrect revenue

And in some cases, sellers were just taking payouts from their sales channels and calling that “revenue” for the day.

That’s where things start to break.

Claim Free Trial of Link My Books + Coupon Code VOVA20 To Get 50% OFF for 3 Months

The Biggest Mistake: Treating Payouts as Revenue

This is one of the most common issues I see.

What Sellers Do

They take the amount deposited into their bank from a platform and log that as total sales.

What’s Actually Happening

That payout already includes multiple elements:

  1. Sales income

  2. Platform fees

  3. VAT components

  4. Refunds or adjustments

So when you record that single number as revenue, you’re missing all the detail that actually matters.

And that leads to incorrect reporting across the board.

VAT Mistakes That Cost You Money

Now let’s talk about the biggest issue according to Link My Books' co-founder, Daniel Little: VAT on income.

The Core Problem: Not Separating Sales by Tax Rate

This is where a lot of sellers slip.

If you sell multiple types of products, they all are likely to have different VAT rates.

Example of VAT Categories

  1. Standard-rated (20%)

Example: computer mouse, keyboard

  1. Reduced-rated (5%)

Example: certain items like foam rollers

  1. Zero-rated (0%)

Example: food, baby products

What Goes Wrong

If you don’t separate these when recording revenue, here’s what usually happens:

You end up treating everything as standard-rated.

So instead of applying 0% or 5% where needed, you apply 20% across the board.

The Result

You overpay VAT.

And that cuts directly into your margins.

Claim Free Trial of Link My Books + Coupon Code VOVA20 To Get 50% OFF for 3 Months

Why These Mistakes Keep Happening

From what I’ve seen, it usually comes down to a few things:

  1. Manual workflows don’t break down transactions properly

  2. Accountants rely on limited or summary reports

  3. Sellers assume totals are enough

  4. There’s no clear separation of tax rates in the data

So even if everything looks “organized,” the actual logic behind it is off.

What Accurate Bookkeeping Actually Requires

If you want to fix this, here’s what needs to happen:

  1. Separate income by VAT rate. Each product type must be categorized correctly.

  2. Break down payouts properly. Don’t treat deposits as revenue.

  3. Track and reclaim VAT on fees. This is often missed.

  4. Work with detailed data, not summaries. The detail is where accuracy comes from

Claim Free Trial of Link My Books + Coupon Code VOVA20 To Get 50% OFF for 3 Months

Final Takeaway

Most sellers think they need bookkeeping software to save time.

But the real reason is accuracy.

If your VAT is wrong or your revenue is misreported, you’re either overpaying tax or risking compliance issues.

Once you start separating income properly and understanding what’s inside your payouts, things become much clearer.

And that’s when your numbers actually start to make sense.

P.S. - I recently published a guide explaining how to track TikTok Shop sales, fees, refunds, payouts, and taxes accurately using proper reconciliation software, read here: Best TikTok Shop Payment Reconciliation Software – Track Sales, Fees, Refunds, Payouts, VAT, GST, Taxes