TikTok Shop UK accounting guide 2025: VAT, fees & tax compliance

Sellers in the UK stumbled upon huge marketing opportunities thanks to the surge of TikTok Shop. While the profit prospects are undeniable, it has also introduced new and more complex accounting guidelines and compliance. As a platform, TikTok’s financial ecosystem is complicated enough to falter even the expert e-commerce operators. 

Hence, we have curated this guide explaining the current VAT rules, tax reporting, and platform fees, along with automation fixes that UK sellers need to be aware of and follow to make their business profitable and compliant. So, as a retail seller in the UK, if you want to scale your business or are thinking of a start-up, this guide would help you stay legitimate, avoid penalties, and safeguard your hard-earned margins.

TikTok Shop’s financial reality

Let’s assume that you are already a TikTok Shop seller. Then you would know how the platform disburses the funds to its users, right? Yes, we are talking about TikTok Pay. However, the payout that you finally receive in your bank account is often not what you see in gross sales. 

Now, why does this happen? There are a few common reasons for this:

• Settlement delays: There’s a standard 15-day release timeline from delivery to payout. It may even be longer in the case of a new or high-risk account.
• Platform reserves: A certain percentage of each sale is held back and disbursed later, which affects the short-term cash flow.
• Timing mismatches: In case of discrepancy between order dates in your OMS (order management system) and the TikTok Pay dates.

How to resolve these? 

• You must always reconcile your payout against TikTok’s settlement statements; cross-checking with your order reports is often inaccurate or insufficient. 
• If needed, you can also leverage a trusted accounting software with TikTok integration to automate the whole process.
• Hire a TikTok UK Accountant to create a specific and accurate mapping for your VAT, fees, and reserves.

TikTok Shop fees in 2025

Typical TikTok Shop charges in 2025 include:

• Commission fees: 2–8% commission based on your category (check Seller Center for current UK rates).
• Payment processing: Estimated 2% per transaction.
• Refund/return admin fees: Only applied in some cases.

Things to keep in mind: If you are a new TikTok Shop seller, your promotional lower commission rates can expire suddenly, turning profitable SKUs into loss-makers. So, make sure to check the TikTok fees updates to review your pricing accordingly.

VAT compliance for UK TikTok sellers

In 2025, the revised UK VAT threshold limit is set at £90,000 for a 12-month turnover. If you exceed this limit, register voluntarily and charge VAT accordingly.

VAT schemes you may be eligible for:

• Standard VAT accounting: You can claim input VAT and file a report on an accrual basis.
• Flat-rate scheme: While this scheme simplifies VAT reporting, it restricts input VAT claims, such as a 12% rate for retail.
• Margin scheme: This scheme applies only to trades of second-hand goods, and VAT is applied on the profit margin only.

Marketplace deemed supplier rules

If you are importing goods in the UK valued at £135 or more, TikTok may be your deemed supplier. This means that the platform itself will collect and remit VAT directly to HMRC. In such cases:

• You are not to charge VAT to the customer.
• Yet, continue to record the sale correctly in your VAT return.

If you misclassify these transactions, it may trigger an HMRC enquiry.

MTD (Making Tax Digital) requirements

A VAT Making Tax Digital (MTD) is already mandatory for all VAT-registered businesses in the UK. So, what are its criteria?

• You must maintain digital records of your transactions only in MTD-compatible software.
• Must file VAT returns via an HMRC-approved platform. 
• Ensure that all data transfers are made through digital links, showing no signs of manual re-entry. 

From April 2026, MTD for Income Tax Self Assessment (ITSA) will legally apply to certain sole traders and landlords. This new adjustment requires them to file quarterly updates with year-end submissions.

Pro tip: Prepare your digital systems today and integrate your TikTok Shop data directly into your business’s accounting software. This will help prevent rushed implementation later on, ensuring that you remain compliant even with HMRC tightening digital record-keeping and reporting standards.

Multi-currency sales and forex management

When you sell internationally on TikTok Shop, you receive payouts in multiple currencies, including GBP, EUR, or USD. This diverse payout creates:

• Forex timing gaps, where exchange rates often fluctuate between the sale date and TikTok’s payout date, can potentially cause losses. 
• There might also be additional 1-3% bank conversion fees unless you have a specialist account.

How to avoid this loss?

• Protect your margins by using multi-currency business accounts, such as Wise, to hold foreign currency balances and convert at favorable rates. 
• Keep an accurate track of each currency in separate clearing accounts and post FX gain/loss adjustments during month-end to maintain transparency of your account performance.

Influencer collaboration costs and VAT

Many TikTok sellers now collaborate with influencers and pay them with cash, product, or both. Each payout has different tax implications:

• For cash payments: Cash payouts are deductible as marketing expenses. However, if the influencer is VAT-registered and bills you, you can reclaim VAT.
• For product payment: Often classified as a barter transaction; however, output VAT may be due on the retail value of the product supplied.

Suggestion: Obtain an invoice or barter agreement with the influencer. Working with a TikTok UK Accountant can help design workflows to accurately record these transactions in your accounting software, so that you do not miss out on VAT obligations.

Automation for real-time tracking

Manual data entry is prone to errors, especially with reserves and forex. To prevent costly mistakes, you may consider:

• TikTok Shop integrations: Link your TikTok Shop data with A2X or similar to post settlements directly into Xero/QuickBooks.
• Expense automation: Use tools like Dext or Hubdoc to track invoices and receipts digitally.
• Cash flow forecasting: Leverage tools like Float or Fathom to structure payout delays and seasonal spikes.

Closure

In 2025, TikTok Shop sellers must follow the legal guidelines; otherwise, it could significantly impact their daily operations. By following this guide and applying the right solutions, or by working with an expert TikTok UK accountant, you can navigate this financial maze with ease and a predictable process, supporting your business’s long-term growth.