Etsy sellers receive money through Etsy Payments. Sales go into the seller’s payment account, fees are deducted, and the balance is deposited to the bank on the chosen schedule. Many small sellers post deposits as income, which mixes sales, fees and refunds into one figure that no longer matches anything on the VAT return or tax return.
The fees to separate
| Fee | Nature | Suggested account |
|---|---|---|
| Listing fees | charged per listing and renewal | Marketplace fees – listing |
| Transaction fees | percentage of the item price and delivery | Marketplace fees – transaction |
| Payment processing fees | per order, for card and wallet payments | Payment processing fees |
| Offsite Ads and Etsy Ads | advertising | Advertising – Etsy |
| Shipping labels bought on Etsy | postage | Postage and carriage |
| Subscription (Etsy Plus) | monthly plan | Marketplace subscriptions |
Splitting them shows what selling on Etsy really costs and makes it possible to price items properly.
Where the figures come from
Use Etsy’s monthly statement and the CSV downloads of orders, deposits and payment account activity. The statement summarises sales, fees, taxes and deposits for the month; the CSVs give the detail. Keep the statements, because they are also the evidence for any VAT on fees.
Posting a month
A VAT-registered UK seller has £1,800 of sales including £300 VAT, transaction and processing fees of £150, listing fees of £30, ads of £60, and a deposit of £1,560. Here the fees are shown without VAT; if the statement shows VAT charged on them, post it to input VAT.
| Account | Debit | Credit |
|---|---|---|
| Etsy clearing | £1,800 | |
| Sales | £1,500 | |
| Output VAT | £300 | |
| Marketplace fees – transaction and processing | £150 | |
| Marketplace fees – listing | £30 | |
| Advertising – Etsy | £60 | |
| Etsy clearing | £240 | |
| Bank | £1,560 | |
| Etsy clearing | £1,560 |
VAT on Etsy fees
Check each monthly statement for the VAT position of the fees: whether UK VAT has been charged (reclaim it), whether the fees are invoiced from outside the UK without VAT (reverse charge if VAT registered), or whether some, such as processing, are exempt. Sellers who are not VAT registered cannot reclaim any VAT charged on fees, which is a real cost. The general rules are in VAT on marketplace and payment fees.
VAT on sales
UK-established sellers charge VAT on their own sales once registered. Etsy collects VAT itself where it is the deemed supplier, such as on low-value imports sent from abroad; those sales must not be taxed again by the seller.
Reconciling the payment account
Each month, the opening balance in the payment account plus sales, less fees, refunds and deposits, should equal the closing balance. Post any reserve Etsy holds to a separate account until it is released.
In Nexbal, the monthly Etsy statement and CSV downloads are the source for the postings, with the statement attached to each one. For income limits that matter to small sellers, sole trader bookkeeping basics.