Value Added Tax (VAT) accounts for 17% of the £732 billion of tax revenue collected a year by HMRC. While you’re hyper diligent about not underpaying VAT for your ecommerce business and being hit with costly interest rates or penalty fees, you also don’t want to end up overpaying and losing out on money that’s rightfully yours. 

You deserve to be rewarded for your hard work. HMRC will always find a way to get the money they’re owed, but you need to look out for yourself and make sure you’re not giving an interest-free loan to the taxman. 

Here are five of the most common mistakes we see that lead to overpaying VAT: 

You’re not properly separating business and personal expenses 

Once your business earns a turnover of more than £85,000 in the last 12 months, you’re legally required to become VAT registered. While this means you have to start charging VAT and passing those earnings on to HMRC, it also means you’re able to start reclaiming VAT on business expenses. 

Business expenses are those that are wholly and exclusively necessary for the purpose of your trade. Think things like office supplies, transport costs, goods purchased for your inventory and even services like accountancy. Any and all VAT paid on expenses such as these can be claimed back on your VAT return. 

That’s why it’s vital you keep your business and personal expenses separate. We recommend creating a separate bank account for your business, as well as keeping diligent records, so there’s no confusion over what you purchased for yourself and what was a business expense. This way, you’ll always claim back what’s owed to you. 

You’re not accounting for seller fees 

You’re all too familiar with the many fees Amazon charges sellers: referral fees, FBA or Fulfilment by Amazon fees, long-term storage fees, monthly costs for selling plans and more.

The good news is, all these fees are considered business expenses you can claim VAT back on! 

It’s also important you remember to deduct these fees from your total revenue. Just because you sold a product for £X doesn’t mean you made £X in profit if Amazon is taking a piece of that pie (like 8-15% in referral fees!) Keep track of all the seller fees you’re charged by various e-commerce hubs to make sure you’re only paying tax on your business’ actual turnover. 

You’re not setting the proper VAT rates on each of your products

There are currently three rates of VAT in the UK: 


  • The standard rate of 20% applies to most goods and services
  • The reduced rate of 5% applies to certain goods and services, including health and welfare products 
  • The zero-rate of (you guessed it) 0% applies to most foods, children’s clothing and footwear, and other health and welfare products like sanitary pads 

There are also some goods and services that are outside the scope of the UK VAT system and which don’t have any VAT rate applied to them. You can find a pretty exhaustive list of goods and services and their relevant VAT rates on the UK government website.

Despite these variations, most ecommerce platforms  will automatically assume any product sold has a VAT rate of 20% unless you manually input the correct rate when adding your inventory to the site. Be sure you’re not skipping this vital step and unnecessarily overpaying on VAT. 

You’re adding UK VAT to goods sold for under 150 to EU consumers 

Amazon and Ebay both act as a VAT collector for the EU. This means they automatically deduct EU VAT on any goods with an intrinsic value of up to €150 sold to consumers in the EU. 

If you’ve already paid EU VAT, make sure you’re not then applying UK VAT to the same sale amount and paying VAT twice! 

If you sell goods with an intrinsic value of over €150 to EU consumers, then you may have to register for VAT in the EU. There is definitely a balance to be struck when deciding if this is worth doing or whether to restrict sales.

You’re relying on Amazon reports for your VAT calculations 

Misapplying VAT rates isn’t the only mistake Amazon can make. Another common way of overpaying VAT is by solely relying on Amazon reports. 

If you’re using Amazon’s VAT Calculation Service, you’ll have access to an Additional VAT Report auto-generated once a month using data provided in the Product Tax Files.

Unfortunately, VAT is incredibly complex, and all the intricacies, variations and exemptions can’t always be handled by an automated report generator. Amazon themselves suggest you review their VAT Transaction Report each month to confirm the details, but how can you confirm details if you don’t know the answers yourself? 

We recommend using A2X to solve this problem. This software forms a link between ecommerce platforms, like Amazon, Shopify and Ebay, and your accounting system, giving you automated, accurate and reconciled numbers. 

Like any system, the quality of your setup will impact the quality of your results, so we recommend getting a professional with experience in the ecommerce world (like Tailored) to help you. Our Financial Review uncovers any inconsistencies or errors in your books, including areas where you might be over (or under!) paying VAT. After the review, we provide you with a prioritised list of next steps to help you start tailoring your business to your lifestyle. 


Get in control of your own path. Book your Financial Review today. 



Senior Accountant

My favourite part of what I do is seeing our clients grow and enjoy their success. From helping clients with tax returns to undertaking monthly and quarterly reviews, I relish the variety of tasks and great people I get to work with in my day-to-day. Having gone back to college in my 40s to gain my accountancy qualifications, I now love working in an approachable, helpful team…and I pride myself on making a top-notch cuppa for my colleagues in the office!

Outside of work, I enjoy spending time with the people who make me happy. You’ll find me going for walks with my family, friends and adorable labradoodle. My motto? Work hard, play hard!

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I founded Tailored after spending many years in the corporate world craving a work-life balance. Wanting to spend more time with my young children without sacrificing my career, my aim was to help small business owners achieve that same balance. I’d always loved numbers and how they can tell a story, explain the past and help predict the future, so I wanted to use that power to support entrepreneurs. 

It’s been an incredible journey growing my business while also seeing our clients also grow theirs. I’m now surrounded by a wonderful team, united in our values of family and learning. We’re a people-oriented firm that loves face-to-face client meetings over a hot cuppa, and we always prioritise the work/life balance Tailored was built on.

Outside of work, I’m a huge advocate for increasing support in schools for children with autism and ADHD. I love staying active, enjoying a stroll in the woods or going to the gym, and one of my proudest achievements is completing the “Couch to 5k” challenge!

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Office Manager

I’m all about building strong client relationships, and due to the nature of my role I’m lucky enough to work with almost all of our wonderful clients. I make sure they’re onboarded properly and have a friendly point of contact for any admin queries, as well as liaising with them to complete confirmation statements, payroll and bookkeeping.

My role also means I get to arrange events and office celebrations for our fantastic team. Outside of work, you’ll find me spending time with family and friends, drinking copious amounts of coffee or dancing the night away at a concert!

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Senior Accountant

Before our firm merged with Tailored in 2022, I was the owner of Martin & Co Accountants for 13 years. I love working with and helping our clients of all sizes, from small sole traders to multi-million-pound companies. I’m FCCA qualified and my role means I deal with all aspects of accounting, from bookkeeping to management accounts and tax returns.

Many moons ago I used to play ice hockey as a goalie, and while I’m no longer on the ice, you might well find me in the snow! I love to travel, whether it’s soaking up the sun on a beach, skiing down a snow-topped mountain or scuba-diving among schools of colourful fish!

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Trainee Accountant

I’m currently doing my accounting degree, which means I get to apply everything I learn in my university course to my role at Tailored. It’s a fantastic way to get hands-on experience with lovely clients and a collaborative team, and my next step will be working towards an ACCA qualification.

I mainly work with sole traders and limited companies, assisting with their bookkeeping to organise their transactions. When I’m not at work, I enjoy doing watersports and love spending time with animals, whether it’s walking my dog or horseriding.

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Semi-Senior Accountant

As the go-to person for all things related to management accounts, I work with clients of all sizes. I’m a fully qualified chartered management accountant. From one-man bands up to large limited companies, I love the variety of businesses I interact with every day.

In the office, you’ll find me organising clients’ transactions and payrolls fuelled by a hefty cup of my favourite coffee and a sweet treat. Outside of work, I’m somewhat of an adrenaline seeker; I once abseiled down Table Mountain in South Africa!

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Assistant Accountant

For me, it’s all about the end result. I get great satisfaction from compiling data to produce accounts, and it’s made even better by the approachable and friendly clients I work with. My favourite part of what I do is putting together management and year-end accounts, and I love the fact we get to help local businesses.

I have a penchant for organisation, even running the admin for my son’s football team! It’s something we’re all involved in as a family, with my husband also helping out with coaching. When I’m not cheering on my boys’ football team, you’ll find me flexing my creative muscles. I love art and design and enjoy getting involved in anything crafty.

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Sarah R.

Senior Accountant

I like to take a people-first approach in all of my work. From cutting out the financial jargon to using clear communication to help clients develop their business, I always aim to connect to the human. I trained in industry alongside Sarah Taylor and I’m also a fully qualified chartered management accountant.

I’m the office go-to person for property and e-commerce accounting, and take pride in providing accountancy services and tax expertise to small businesses in a timely manner. The outdoors is my happy place, and I love going for walks with my family and breathing in the fresh air. A few years ago I climbed the Three Peaks; Ben Nevis, Snowdon and Scaffel Pike…but not at the same time!

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Supporting local and family businesses is something that’s close to my heart, as Tailored’s founder Sarah is my sister! I look after the bookkeeping and VAT returns for a variety of clients, including those in the film and TV industry.

My day-to-day involves getting hands-on with Xero and QuickBooks and helping business owners make sense of their finances. When I’m not helping clients harness the power of their numbers, I love spending time with my young son or enjoying a classic episode of Only Fools and Horses. Of course, all with a good brew in hand.

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