The Good News : The Tax Is the Same Either Way
Here is the reassuring part. Declaring gross income and claiming fees as expenses produces exactly the same taxable profit as declaring net income and claiming no fees. The maths is identical.
Gross income £33,100 minus fees £4,700 equals taxable profit £28,400. Net income £28,400 minus no fees equals taxable profit £28,400.
The taxable profit is the same. The tax owed is the same. Nobody has paid the wrong amount of tax by using the net figure, provided they also claimed no fees as expenses, which most sellers who use the net figure do not.
The problem is not the tax calculation. It is the disclosed income figure. HMRC's DAC7 data shows £33,100. The return shows £28,400. That £4,700 gap looks like undisclosed income. It is not, it is a presentation error, not a fraud. But it is the kind of discrepancy that can trigger a compliance check, require explanation and create administrative burden for a seller who did nothing wrong and simply did not know the correct method.
Getting the income figure right from the start avoids all of this. Gross in, fees out, profit the same.The fee correction is the most important change for sellers who have been filing incorrectly. But it is not the only expense category worth reviewing.
Stock purchases, the cost of goods bought to resell, are an allowable expense. For a reseller who buys at car boot sales, charity shops and online marketplaces, every pound spent on stock that was subsequently sold is a deductible cost. These should be entered in the Expense Tracker alongside the platform fees.
Postage and packaging costs are allowable. Mileage to sourcing locations, post offices and collection points is allowable at 45p per mile for the first 10,000 business miles in 2025/26. Storage unit rental is allowable. The business proportion of a phone used for managing listings and communicating with buyers is allowable.
Most sellers who have been using the net payout method have also been under-claiming expenses, because the habit of looking at bank deposits rather than transaction reports means the full picture of both income and costs is never assembled in one place. The transaction report fixes both simultaneously. It shows the correct income and it shows every fee, which is often the largest single expense category.
For sellers who have no records beyond bank statements, the guide to reconstructing your Self Assessment records covers how to work back from what exists and build a complete picture for the 2025/26 return.
What Marcus Found When He Downloaded His Report
Marcus downloaded his eBay Seller Hub transaction report for 2025/26 for the first time. He had never looked at it before, he had always used his bank deposits.
Gross sales: £33,100. Total eBay fees: £4,700. Net payout: £28,400. Exactly what had been appearing in his bank account across the year.
He also downloaded his Depop transaction history. Gross sales: £6,200. Depop fees: £620. Net payout: £5,580.
Combined gross income: £39,300. Combined fees as allowable expenses: £5,320. Net payout total across both platforms: £33,980 , which was what he had been declaring as income on previous returns.
His other expenses included stock purchases of £8,400 from bank statements, postage and packaging of £1,100, mileage of £630 reconstructed from his sourcing diary, brought his total allowable expenses to £15,450.
Taxable profit: £39,300 minus £15,450 equals £23,850.
The profit figure was almost identical to what his previous returns had produced using the net method with no fee claims, because the maths is the same either way, as explained above. What was different was the disclosed income figure. And the expenses were now complete rather than absent.
He entered everything into the 2026. Income tax through Self Assessment on profit above the personal allowance:
£2,926. Class 4 NI: £683. Payment on account: £1,805. Total due 31 January 2027: £5,414.
The number was not a surprise. He had saved toward something close to it. What was a surprise was how much simpler the calculation was once the right figures were in the right place and how much more defensible his return was now that the income figure matched what eBay and Depop had already sent to HMRC.
If You Have Filed Wrong Figures in Previous Years
If you have been declaring net payouts rather than gross income on previous returns, you can amend them. HMRC allows amendments to Self Assessment returns within twelve months of the original filing deadline. For 2024/25 returns, amendments are possible until 31 January 2027. For 2023/24, the amendment window has already closed.
Whether to amend previous returns depends on whether the error has created a genuine discrepancy. If you declared net income and also claimed no fees, as most sellers using the net method do, your taxable profit and your tax liability were correct. The income figure was wrong but the tax was right. In that case, amending previous returns to show gross income and fees separately does not change the tax owed and may not be necessary.
If you declared net income and also claimed fees as separate expenses, which would result in a lower profit than the correct method that is a genuine error and an amendment is appropriate.
If you are uncertain about previous years, the position for 2025/26 is the priority. File this year's return correctly — gross income, fees as expenses, complete expense record and the 2025/26 DAC7 data will match your return. Previous years are a separate question that depends on the specific figures involved.
For first-year sellers filing their first return and wondering where to start with everything, the guide to what happens in January 2027 covers the full self-employed tax picture from the beginning.
UK Sole Trader Tax Calculator 2025/26 — Enter your gross platform income, fees and expenses. Get your exact January 2027 bill. £19.99 →
