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Your Etsy orders show £1,520.00 of sales, but the bank receives £1,240.00. Looking at the deposit alone does not explain the difference. You need the Etsy fees, refund, fee credit and postage purchases that sit between the orders and the payout.
The worked example below follows that money through to the bank. It gives UK sole traders, limited companies and their bookkeepers a practical way to reconcile Etsy payouts without treating every deduction as the same expense.
Why the deposit does not equal your sales
Etsy nets charges and adjustments against the money collected from buyers before paying out. A deposit therefore shows the amount transferred to your bank after those entries, rather than the full value of the sales behind it.
Start with the payment account entries that explain the particular payout. Identify the sales, then follow the deductions and credits through to the transfer. Keep any balance carried between statements visible instead of forcing all activity into the month when the bank received the money.
For a limited company, accounting records must include all money the company receives and spends. Recording gross sales and the separate deductions preserves that detail; recording only the net deposit loses it. This follows the record-keeping requirement in the government guidance on company and accounting records.
Here, “gross sales” means sales before marketplace deductions. It does not mean that a VAT-registered seller should ignore any VAT included in their selling prices.
Etsy fees in a UK payout, one by one
The rates below are rates assumed for the example, not a current Etsy price list. Etsy changes its fees. Take the actual charges and applicable rates from your own statement and supporting documents, including any entries absent from this simplified example.
Transaction fees. The example assumes 6.5% of £1,520.00, including postage charged to buyers. That produces a £98.80 charge before the refund-related credit.
Payment processing fees. These cover payment processing separately from the transaction charge. The assumed rate is 4% plus £0.20 per order, giving £68.40 across 38 orders. The processing fee on the refunded order is not returned in this example; do not assume all charges reverse when a buyer receives a refund.
Listing and renewal fees. These relate to listing activity rather than simply the number of completed orders. The example uses 45 renewals at about £0.16 each, totalling £7.20. Use the sterling charges actually recorded, rather than treating the approximate amount as a fixed conversion.
Offsite Ads. This is an advertising charge associated with an order. The example assumes 15% on one £60.00 order, so the deduction is £9.00. It does not apply that percentage to all sales.
VAT on Etsy fees. The example assumes 20% VAT on the transaction, listing and advertising charges after the transaction fee credit. It does not add VAT to the processing charge. Follow your fee invoice for the actual treatment; this example is not a statement of how VAT applies to every seller.
Postage labels. Labels bought through Etsy are separate postage costs. The example includes seven labels costing £32.12. Keep those purchases distinct from the postage buyers paid, which is already included in gross sales.
A worked example: one £1,240 payout
This example assumes the entries below fully explain the payout, with no opening or closing balance to reconcile. The assumed rates are used only to demonstrate the calculation.
| Line | Amount | How it was worked out |
|---|---|---|
| Sales, including postage charged to buyers | £1,520.00 | 38 orders |
| Transaction fees | −£98.80 | 6.5% of £1,520.00 |
| Payment processing fees | −£68.40 | 4% of £1,520.00 plus £0.20 × 38 orders |
| Listing and renewal fees | −£7.20 | 45 renewals at about £0.16 |
| Offsite Ads fee | −£9.00 | 15% of one £60.00 order |
| Refund to a buyer | −£45.00 | one damaged item |
| Transaction fee credited back on the refund | +£2.93 | 6.5% of £45.00 |
| VAT on Etsy’s fees | −£22.41 | 20% of (£98.80 + £7.20 + £9.00 − £2.93) |
| Postage labels bought on Etsy | −£32.12 | seven labels |
| Deposit to your bank | £1,240.00 |
The refund and the fee credit are different entries. The £45.00 reduces sales, while the £2.93 reduces the transaction fee expense. The VAT calculation uses the fee amount after that credit, with the result rounded to pennies.
The £22.41 is VAT charged to the seller on Etsy’s fees. It is not VAT on the seller’s sales, and the payout calculation does not establish the seller’s sales VAT liability.
How to record it in your books
Keep the sales, refund and individual expenses visible. For this example, the bookkeeping breakdown is:
- Gross sales of £1,520.00 and a separate £45.00 sales refund, leaving £1,475.00 after the refund.
- Transaction fee expense of £95.87, made up of the £98.80 charge less the £2.93 credit.
- Processing expense of £68.40, listing expense of £7.20 and advertising expense of £9.00.
- VAT on fees of £22.41, identified separately for the appropriate VAT treatment.
- Postage expense of £32.12 and a bank receipt of £1,240.00.
The deductions after the sales refund total £235.00: £95.87 + £68.40 + £7.20 + £9.00 + £22.41 + £32.12. Sales after the refund of £1,475.00 less £235.00 leave the £1,240.00 deposit.
In that calculation, “net sales” means sales after the refund, before any sales VAT split. VAT-registered sellers need the appropriate sales and purchase VAT coding as well as a balanced payout. Identifying the £22.41 separately does not by itself establish a right to reclaim it.
A practical method is to use an Etsy clearing account: a bookkeeping account that holds the sales and deductions until the payout is matched. Record the bank receipt as a transfer from that account. If the sales have already been imported, match the existing entries rather than entering them again.
At the standard VAT rate of 20%, VAT already included in an amount is one sixth of that amount. Applying 20% to a VAT-inclusive total would overstate the VAT within it. The VAT fraction explained in VAT Notice 700 distinguishes extracting included VAT from adding VAT to a price before tax.
Billfetch connects to Etsy and your bank, books each payout as gross sales with the fees, refunds and labels alongside it, and flags any deposit it cannot explain. See which integrations it supports.
Where the figures come from
Keep the monthly statement, the CSV export of the payment account and Etsy’s VAT invoice for fees together. Use the statement to understand the period and balances, the CSV to trace individual transactions, and the invoice to support the VAT charged on fees.
For each payout, retain a calculation linking the relevant entries to the bank receipt. Include references that let you find a refund or fee credit again. If a statement includes activity outside the payout being checked, identify that activity separately instead of changing an expense to make the total fit.
HMRC says VAT cannot be reclaimed using an invalid invoice, a pro-forma invoice, a statement or a delivery note. Keep Etsy’s VAT invoice for its fees alongside the statement; VAT records must be retained for at least 6 years. These requirements are set out in the guidance on keeping VAT records.
If your bank feed is not connected, use a bank CSV to locate the matching receipt. The help article on connecting a bank with a CSV statement explains that route.
At year end, hand the accountant the statements, transaction exports, fee invoices and reconciliations, with any unexplained balances clearly marked. The help article on what is in the accountant package shows how that handover can be organised.
Mistakes that stop the numbers balancing
Posting the deposit as sales. Entering £1,240.00 as turnover hides both the higher sales figure and the costs deducted before payment. Match the bank transfer to the underlying sales and expenses instead.
Matching by calendar month alone. A bank receipt date is not enough to select the sales it represents. Work from the payment account statement and payout entries, checking the opening and closing balances rather than assuming a month’s orders equal a month’s deposits.
Treating dollar-priced listing fees as fixed sterling costs. The approximately £0.16 used here is an example assumption. For listing charges priced in US dollars, use the sterling entries in your records rather than multiplying by a remembered pound amount.
Including labels bought after the cut-off. A label associated with an order may appear outside the statement or payout period you are reconciling. Check the label purchase entry before including it in that payout’s deductions.
Missing the fee credit. Recording the £45.00 refund without its £2.93 transaction fee credit leaves the example out of balance. Check credits as carefully as charges, and avoid assuming a processing fee was returned when the statement shows no return.
If a deposit still cannot be matched, keep the difference identifiable while investigating it. The help article a payment has no invoice gives a starting point for an unmatched payment.
Marketplaces can report your sales to HMRC
UK digital platforms may need to report seller details to HMRC. Under the goods-sales exception, sellers receiving a total of €2,000, approximately £1,700, or less for fewer than 30 sales in a year do not need to be reported. Both conditions must be met. The digital platform operator guidance sets out that exception.
That is a reporting exception, not a conclusion about an individual seller’s tax position. The cited guidance describes platform obligations generally; it does not establish whether Etsy reports a particular seller. Keeping gross sales, deductions and deposits traceable makes any comparison with platform information easier to explain.
Frequently asked questions
Why is my Etsy payout less than my sales?
The payout reflects deductions and credits applied before the bank transfer. In this example, £1,520.00 of sales becomes £1,240.00 after the refund, fees, fee credit, VAT on fees and postage labels. Check the entries belonging to that payout rather than comparing the bank receipt with an unrelated sales period.
Should I record Etsy sales before or after fees?
Sales are usually recorded before marketplace fees, with the deductions shown separately; a limited company’s records must show all money received and spent. In this example, that means £1,520.00 of gross sales and the £45.00 refund, with the expenses that explain the deposit recorded alongside. That separation is the basis of clear Etsy payout bookkeeping.
Can I reclaim VAT on Etsy fees from the monthly statement?
The monthly statement is not sufficient evidence for a VAT reclaim. Retain the valid VAT invoice for the fees and check the applicable treatment; HMRC’s VAT record guidance states that VAT cannot be reclaimed using a statement.
Are Etsy processing fees returned when I refund an order?
The processing fee on the refunded order is not returned in this example. Only the £2.93 transaction fee credit appears against the £45.00 refund. Use the actual credits on your statement rather than applying this example as a general refund policy.
General information, not advice. This is general information about UK rules at the time of writing, not advice about your tax position. Check the linked government guidance or speak to an accountant about your situation.
