What makes Shopify different
The payout is the least useful number in your business
A Shopify store generates at least four figures for every period and only one of them hits your bank. There is what customers paid, the processing fee each gateway kept, the refunds and chargebacks that went back out, and the net payout. Treat the payout as turnover and your sales are understated, your fees are never claimed, your VAT is wrong and your gross margin is meaningless.
It gets busier when a store takes money through more than one gateway. Shopify Payments, PayPal and Stripe each settle on their own cycle with their own fee structure and their own statement format, so three sets of settlements have to be tied back to one set of orders.
Then there is stock, which is where most online stores lose track of whether they are actually profitable, and VAT, where the threshold is measured on gross sales while the owner is watching payouts. Our wider retail and ecommerce page covers marketplaces and multichannel selling alongside this.
Who we act for
Stores at every stage
New and growing stores
A store trading as a sole trader, often alongside a job, where the questions are whether to register for VAT, what can be claimed and whether a company would help.
Established direct to consumer brands
Own brand stores with real stock, suppliers and marketing spend, where the need is monthly margin by product and a reliable cash position rather than a year end set of accounts.
Shopify plus marketplaces
Stores that also sell on Amazon, eBay or Etsy, where marketplace rules and your own store rules differ and the numbers have to be consolidated.
Dropship and print on demand
Stores with no stock of their own, where the supplier invoice, the fulfilment fee and the place of supply drive the VAT answer.
Payouts and reconciliation
Four figures, recorded as four figures
We reconcile a Shopify store from the order side, not the bank side. Gross sales by VAT treatment, discounts given, shipping charged to the customer, gateway fees by gateway, refunds and chargebacks, then the payout as the balancing figure. When that ties, your sales are right, your fees are claimed and your VAT return is built on the correct base.
Each gateway has a quirk worth knowing. Shopify Payments nets fees and refunds before paying out, so the deposit understates both sides. PayPal holds a balance of its own, so money can sit outside your bank for weeks and still be your income. Stripe settles on its own cycle with fees shown separately. All three need their settlement reports, not just the bank line.
Refunds, chargebacks and discounts each behave differently. A discount reduces the sale. A refund reverses one, and may cross a VAT period. A chargeback takes the money and usually a fee with it. Coded as one undifferentiated deduction they hide a margin problem; coded properly they show you which products and which channels are actually making money.
Software
We work in Xero, QuickBooks Online and FreeAgent, and we are certified on Xero and QuickBooks. Where a connector between your store and your ledger suits the business we will set it up and reconcile around it; where it would summarise away the detail you need, we would rather import the Shopify reports and the gateway settlements and keep the breakdown.
Packages
- Sole Trader Plus £69 a month
- Company Core £99 a month
- Company Growth £179 a month, books and VAT
- Cloud software set up and migration from £150
- Self Assessment tax returns from £120
VAT for online sellers
Measured on sales, not on payouts
The registration test is on gross taxable turnover. These are the figures and tests that decide it.
VATRegistration
Both tests apply, and either one can bring you in.
| Registration threshold | £90,000 |
| Backward testRolling, not your financial year | Any 12 months |
| Deadline to register | 30 days after month end |
| Forward testIf you expect to pass it in 30 days alone | Next 30 days |
| Measured on | Gross sales |
| Voluntary registration below the threshold | Possible |
Shipping charged to the customer forms part of the consideration. Gateway fees are not deducted before the test.
RTWhat you are selling
The treatment follows the goods and the customer.
| Most goods to UK consumers | Standard rated |
| Children's clothing and most food | Zero rated |
| Books and printed matter | Zero rated |
| Goods exported out of the UKEvidence of export needed | Zero rated |
| Sales to EU consumers | EU rules apply |
| Digital products and downloads | Own rules |
A store with a mixed catalogue needs its products mapped to the right rate in Shopify before a VAT return can be trusted. Getting this wrong in either direction is expensive.
Stock and margin
The two numbers that tell you whether this works
Cost of goods sold is opening stock plus purchases less closing stock, and the closing figure is the one stores skip. Without a count, the gross margin is a guess, and because closing stock in one year is opening stock in the next, a bad guess puts the profit out in two years running.
Landed cost is the other half of it. The unit price is not the cost: freight, duty, import VAT where it is not recoverable and fulfilment all belong in the cost of getting the product to a customer. Marketing is not a cost of sale but it is the number to watch next to it, because a healthy gross margin and an unhealthy contribution after advertising is the commonest way an online store grows itself into trouble.
From there, monthly management reporting is what the work is for. Sales and margin by channel, fees as a percentage of sales, stock holding and days of cover, and a cash position that accounts for stock on the water. That is included in Company Growth and above, and available on its own.
Packages
- Company Growth £179 a month
- Company Premium £299 a month, monthly management accounts
- Sole Trader Plus £69 a month
- Virtual finance department from £450 a month
- VAT registration and scheme advice £150
Structure
Sole trader or limited company, on your own numbers
What actually decides it
Your profit level, how much of it you need to draw personally, whether you are reinvesting in stock, whether a supplier or a platform requires a company, and whether you expect to sell the business one day.
What changed in April 2026
Dividend rates rose by two percentage points, so the ordinary rate is 10.75% and the upper rate is 35.75%. That narrows the gap between extracting profit from a company and simply trading as a sole trader at middling profits.
How we answer it
We model your own figures both ways, including National Insurance, Corporation Tax, the dividend allowance and the cost of running a company, and give you the difference in pounds rather than a general rule.
If you do incorporate
Formation with a registered office for a year and director identity verification is £125, and the transfer of the trade, the stock and the Shopify account needs planning rather than doing in a rush at a year end.
Fees
Published, and quoted before we start
Bookkeeping, VAT and the year end for a Shopify store sit inside the monthly packages. Sole Trader Plus is £69 a month with the books kept for you and VAT returns included. Company Core is £99 a month for the filings, Company Growth is £179 a month with the bookkeeping and VAT, and Company Premium is £299 a month with monthly management accounts.
Setting up or migrating your software is from £150 as a one off, and VAT registration with scheme advice is £150. A Self Assessment return on its own starts from £120. Final fees depend on the complexity of your tax affairs and a fixed quote is provided before any work begins.
Where a store is larger or has several entities, the virtual finance department is priced after a scoping call and is typically from £450 a month.
Packages
- Sole Trader Plus £69 a month
- Company Core £99 a month
- Company Growth £179 a month
- Company Premium £299 a month
- Self Assessment tax returns from £120
Questions
Frequently asked
Why does my Shopify payout never match my sales?
Because a payout is not a sales figure. Shopify Payments nets off its processing fee, refunds issued in the period, chargebacks and any adjustment, then pays the balance on a cycle. So one deposit can span two days of orders and can contain a refund from last month. Sales, fees and refunds each have to be recorded separately, with the payout reconciled to the sum of those parts rather than treated as turnover.
Is my VAT threshold based on sales or on what I actually receive?
Gross sales. Taxable turnover is measured on what the customer paid before Shopify, PayPal or Stripe took anything, so a store with £95,000 of UK sales and £88,000 of payouts has passed the £90,000 threshold. The twelve month test is a rolling one, not a financial year, and there is also a forward looking test for the next thirty days.
Do I charge VAT on sales outside the UK?
It depends where the customer is, what you sold and where the goods went. Exports of goods out of the UK can be zero rated where you hold the evidence. Sales to EU consumers bring in the EU rules, where the one stop shop can let you account for the VAT of several member states through one return, and low value consignments have their own treatment. Digital products are different again. It is worth getting right before volume builds rather than unpicking it later.
How do you work out my cost of goods sold?
Opening stock plus purchases less closing stock. The part most stores get wrong is closing stock, because without a count at the year end the gross margin is a guess and the profit is wrong in both directions across two years. We agree a stock figure with you and keep the basis consistent.
Should I be a sole trader or a limited company?
It depends on your profit, whether you need the money personally, your appetite for filing obligations and what you plan to do with the business. A company is not automatically better and at lower profits it often is not. We run the numbers both ways on your own figures and show you the difference, including the dividend rates that rose in April 2026.
Which software do you work in?
Xero, QuickBooks Online and FreeAgent. We are certified on Xero and QuickBooks and we support FreeAgent. For a Shopify store we reconcile from your Shopify reports, your gateway settlement statements and your bank, so the books hold sales, fees and refunds separately rather than one lump per payout.
Related
You may also need
Shopify accounting UK: VAT, fees and bookkeeping explained
Payouts, gateway fees, refunds, VAT and stock, worked through in order.
Read moreSectorRetail and ecommerce
Marketplaces, multichannel selling and high street shops.
Read moreServiceVAT compliance
Registration, scheme choice and quarterly returns filed on time.
Read moreGet your store reconciling properly
Book a free 30 minute call. Tell us what you sell, where you sell it and which gateways you use, and we will tell you what we would do and what it would cost.
Or just pick up the phone
+44 7456 385980info@taxmesh.co.uk
