How to work out your profit on an eBay sale

What costs go into an eBay profit calculation?

Before you can work out profit, list every cost that comes with a sale. For most UK sellers that means:

• Item cost: what you pay your supplier for the item, including any delivery charge from them to you or to your buyer.
• Postage and packaging: the label, plus boxes, mailing bags, tape and labels.
• eBay’s final value fee: a percentage of the total sale that depends on the category, plus a per-order fee of 30p (orders of £10 or less) or 40p (orders over £10).
• eBay’s regulatory operating fee: 0.35% of the total sale for business sellers.
• International fee, if the buyer is outside the UK: a percentage of the total sale that depends on the country.
• Ad fee, if you use Promoted Listings: for example, your chosen ad rate as a percentage of the total sale.
• VAT: any VAT you owe on the sale, and any VAT on costs you can’t reclaim.
• Returns allowance: a small amount set aside for refunds, return postage and items that come back unsellable.

Watch out eBay’s percentage fees are worked out on the total amount of the sale, including postage and taxes. If you use the item price alone, you’ll underestimate your fees.

The eBay profit formula

Profit = sale total − item cost − postage and packaging − eBay fees − ad fee − VAT − returns allowance.

Sale total is everything the buyer pays: the item price plus any postage charge.

eBay fees = (category percentage × sale total) + per-order fee + (0.35% × sale total). Add the international fee for buyers outside the UK.

Profit margin = profit ÷ sale total × 100. Margin helps you compare items, but always check the profit in pounds too. A 20% margin on a £5 item is only £1, which a single return can wipe out.

Worked example: a £30 sale

These numbers are an example only. They’re round figures to show the method, not typical costs or results. The item sells for £30 with free postage, to a UK buyer, in a category with a 12.9% final value fee. The seller isn’t VAT-registered, promotes the listing at a 5% ad rate, and keeps 3% of each sale aside for returns.

Tip eBay’s business fees are listed without VAT. Check your eBay invoice to see whether VAT is added to your fees, and leave that line out if it isn’t.

How VAT changes your eBay profit

If you’re not VAT-registered, you don’t charge VAT on your sales. Any VAT you pay on costs, such as on eBay fees, is simply part of your costs.

If you are VAT-registered, part of each sale is VAT you owe HMRC. At the standard 20% rate, the VAT inside a price that includes VAT is one sixth of it. On a £30 sale that’s £5.

You can usually reclaim VAT you pay on business costs, such as VAT on eBay fees or VAT your supplier charges, if you have valid VAT invoices.

Using the example above for a VAT-registered seller: take off the £5 VAT on the sale and add back the £1.18 VAT on fees if you can reclaim it. Profit falls from £4.54 to £0.72, before any VAT you can reclaim on the item cost.

You must register for VAT if your taxable turnover goes over £90,000 in a rolling 12 months, or you expect it to in the next 30 days. VAT schemes such as the Flat Rate Scheme work differently. Check with an accountant before you rely on these numbers.

How to set a returns allowance

Some orders come back. Some need a partial refund. If an item is faulty, damaged or not as described, you pay the return postage, and the item may not be sellable again.

There’s no standard figure for this. When you start, pick a cautious percentage of each sale and set it aside. Once you have a few months of orders, base it on your own returns and refunds.

Fragile items, and items that come in sizes, may need a bigger allowance. Accurate listings and good packing help keep it small.

Set a minimum profit before you list

Decide the least you’ll accept per order, in pounds, before you list. Then work backwards to the lowest price that still gives you that profit after all fees and costs.

Recheck the numbers when anything changes: your supplier’s price, postage rates, your ad rate or eBay’s fees. A listing that was profitable last month can lose money this month.

OneDS shows the profit on an item after eBay fees before you publish it, and can block publishing below a minimum profit you set.

Common profit mistakes

• Working out fees on the item price instead of the total including postage.
• Forgetting the per-order fee, which matters most on cheap items.
• Leaving out the ad fee on promoted listings.
• Forgetting packaging, which adds up across many orders.
• Forgetting the international fee on sales to buyers outside the UK.
• Counting VAT as profit when you’re VAT-registered.
• Not allowing for returns at all.