- You can sell online as a sole trader or a limited company.
- Register for VAT once taxable turnover passes £90,000 in any 12 months.
- You need a GB EORI number before you can import stock into the UK.
Knowing how to start an ecommerce business in the UK comes down to a few decisions you settle before your first sale: whether to trade as a sole trader or a limited company, registering with HMRC or Companies House, opening a business bank account, and recording every sale and cost from day one. You don’t need to register for VAT until your taxable turnover crosses the registration threshold, though marketplace sellers reach it faster than expected, and an ecommerce accountant is usually the person who keeps that side straight. If you’re importing stock, you’ll also need an EORI number before goods can clear customs.
This ecommerce guide covers each step of setting up an ecommerce business in the UK in the order you’ll actually meet it, because most people are already selling by the time they sort the admin.
What do you need in place before your first sale?
Before you start an ecommerce business in the UK, a handful of things need to be in place for it to run cleanly. The short version: a business structure, registration with the right body, a way to take payment, and a record of every sale and cost.
At a minimum, you’ll want:
- A decision on structure: sole trader or limited company.
- Registration with HMRC as self-employed, or a company registered at Companies House.
- A separate account for the money, and opening a business bank account early keeps your figures clean.
- A record of sales and costs from the first order, not the first tax return.
None of this needs to be finished before you list a product. It does need to be true before the money starts moving, because HMRC and your future accountant both work from those records.
Sole trader or limited company for an online business?
Most online sellers start as a sole trader, because it’s the quickest way to begin and the admin is lighter. You register as self-employed, report your profit through Self Assessment, and you’re personally responsible for any debts. It suits a shop that’s testing whether it has a market.
A limited company is a separate legal entity, which protects your personal assets and can be more tax-efficient once profits grow. It costs more to run and carries more filing, so it’s usually the right move when the numbers justify it rather than on day one. If you go this route, registering a limited company at Companies House is the first formal step.
The two structures are taxed differently, so it’s worth reading how the tax compares between the two structures before you commit.
If you’re selling alongside a full-time job, you can still be a sole trader. Your employer’s PAYE keeps running, and you report the shop’s profit separately through Self Assessment, so both sources appear on the same return without taxing the same money twice.
How do you register with HMRC or Companies House?
If you’re trading as a sole trader, you register as self-employed with HMRC and file a Self Assessment return each year. You need to do this once your gross trading income passes £1,000 in a tax year, and the deadline is 5 October after the tax year in which you crossed it.
If you’re forming a company, you register it at Companies House, which currently costs £100 to register online. New directors and people with significant control now have to verify their identity, so build a little time in for that.
A new company also has to register for Corporation Tax with HMRC, usually within three months of starting to trade. Miss it and the penalties are avoidable admin you don’t want in month one.
Should you sell on your own store or a marketplace?
This is usually framed as a marketing choice, but the accounting consequences matter just as much. On your own store, built on a platform like Shopify or WooCommerce, the money lands in your payment processor and the picture is relatively simple. On a marketplace like Amazon, eBay or Etsy, the platform sits between you and the customer and deducts its fees before it pays you.
That difference shapes your books. A marketplace payout is your sales minus fees, and sometimes minus advertising and returns, so the amount that reaches your bank is not your turnover. You’ll need to record the gross sales rather than the payout, and it matters for VAT, as the next section explains.
Plenty of sellers use both at once, and that’s fine. It just means two sets of statements to reconcile, which is worth knowing before you’re doing it across four platforms at year end.
What changes the moment you make your first sale?
Your first sale turns a plan into a business, and a few obligations switch on with it. The main one is record-keeping: from the first order, you need to keep records of what you sold, what it cost, and what fees came off, because those records support every return you file.
The figure that trips people up is gross sales against payouts. HMRC cares about the total value of what you sold, not the net amount the platform deposited, so your bookkeeping has to capture the gross and treat fees as a separate cost. Get this right early and VAT becomes far less stressful later.
You also pick up consumer obligations. Distance selling comes with rules on refunds and a cancellation period, and the consumer rights obligations for online sellers are worth reading in outline before a real customer tests your returns policy.
How does VAT work for online sellers?
You have to register for VAT once your taxable turnover passes the VAT registration threshold, which is £90,000 in any rolling 12-month period for 2026/27. It’s a rolling test, so you check the last 12 months at the end of every month, not just at your year end.
Online sellers reach it faster than they expect, for the reason covered above: the threshold counts your gross sales, not the money the marketplace pays you after fees. A shop that feels like it’s turning over £70,000 in the bank can be well past £90,000 in gross sales.
Cross-border sales add another layer. If you sell to customers in the EU, the VAT position depends on what you sell and where it ships from, and the rules differ again for digital products. This is the point where most sellers bring in an accountant rather than guess.
What do you need to import stock into the UK?
If you’re bringing stock in from abroad, you need a GB EORI number before anything can clear customs. It’s free and quick to apply for one on GOV.UK, and our guide to getting an EORI number walks through the detail.
Import VAT and duty come next. Import VAT is charged on goods entering the UK at the rate that would apply if you’d bought them here, and duty depends on what the goods are and where they’re from. If you’re VAT-registered, you can usually account for import VAT on your return rather than paying it at the border.
The mechanics get fiddly, so it’s worth reading VAT on imports and exports before your first shipment. Getting the paperwork right stops stock sitting at the border while a courier waits for a number you don’t have yet.
What do payment platforms report about you?
Since January 2024, digital platforms have had to report your details to HMRC. Marketplaces and apps like eBay, Etsy, Amazon and Vinted send HMRC your sales information once you pass a low bar, roughly 30 sales or about £1,700 in a year, and HMRC checks it against what you’ve declared.
This is a data feed rather than a new tax. It means undeclared selling is far more likely to be spotted than it used to be, so if you’re trading, the safe move is to register and report properly rather than assume the numbers stay private.
Payment processors report on a gross basis too. So your own records need to reconcile to the gross figure the platform sends, which is another reason to track sales rather than payouts.
How does bookkeeping change when your sales come from a platform?
The standard monthly routine of matching invoices to bank payments doesn’t fit an online shop. Your sales don’t arrive as neat invoices; they arrive as settlement reports, with fees, refunds and sometimes multiple currencies netted into one payout. Reconciling that to your bank takes a different approach.
In practice, that means pulling the detail from each platform, recording gross sales and fees separately, and matching the net to what actually landed. Do it monthly and it’s manageable; leave it to year end and it becomes a reconstruction job. This is the part accountants who work with online sellers handle every week, because they already know how each platform lays its reports out.
Getting the right software for your stage helps as well. From April 2026, Making Tax Digital for Income Tax is being phased in for sole traders above set income levels, so keeping digital records now saves a scramble later.
What’s on your first-year compliance checklist?
Not all of setting up an ecommerce business in the UK happens on day one, but this is what to keep on top of in the first year:
- Register with HMRC as self-employed, or form a company and register for Corporation Tax.
- Open a separate business bank account and keep personal spending out of it.
- Record gross sales, fees and costs from your first order.
- Watch your rolling 12-month turnover against the £90,000 VAT threshold.
- Get a GB EORI number before importing any stock.
- Reconcile each platform’s payouts to your books every month.
- Keep digital records ready for Making Tax Digital.
Treat this ecommerce guide as a working checklist rather than a one-time read, and the admin stays a background task instead of a year-end emergency.
How Sleek helps with starting an ecommerce business
Sleek sets up the accounting behind your online shop from the start, so the compliance side of starting an ecommerce business is handled while you get on with selling. Our in-house, qualified accountants work with online sellers every week, so they already know how marketplace payouts, platform fees and VAT actually behave.
Ready to get your online shop’s accounting sorted?
FAQs on how to start an ecommerce business
Do I need a limited company to sell on Amazon or Etsy?
No. You can sell on Amazon, Etsy or any marketplace as a sole trader, and most sellers start that way. A limited company can be worth it once profits grow or you want the liability protection, but it’s a tax and risk decision, not something the platform requires.
Do marketplace fees count as an expense?
Yes. Selling fees, payment processing fees and platform advertising costs are all allowable business expenses. Record them separately from your gross sales, because your turnover is the full sale value and the fees are a cost you deduct from it.
Do I have to register a business to sell on eBay?
Selling the odd personal item isn’t trading, so there’s nothing to register. Once you’re buying or making things to sell for profit and you pass £1,000 in a tax year, you’re trading and you register with HMRC. eBay reporting your sales to HMRC doesn’t change that test; it just means HMRC can see the activity.
Can I run my ecommerce business from home?
Yes, most online sellers start from home and there’s no need for separate premises. If you rent, check your tenancy allows it, and if you own your home your mortgage or lease may carry similar terms. Running from home rarely triggers business rates unless part of the property is used only for the business.
What happens if I've been selling for a year without registering?
You register now and bring your records up to date, declaring the income you should have reported. HMRC can charge penalties and interest on tax paid late, but these are usually lower if you come forward before they contact you. An accountant can work out what’s owed and file it correctly.
For more questions about starting a business in the UK, see our full FAQ hub.
