Build your chart around VAT treatment, not just product type — it’s the difference between a clean return and a denied scheme.
Quick answer. Tailor Xero’s default chart to a card business: split sales (singles, sealed, accessories, events, shipping) and costs (stock, grading, platform fees, processing, postage, software, shows). Combined with tracking categories, this makes every report and VAT return clearer from day one.
Your chart of accounts is the backbone of your books — the list of categories your income and costs get sorted into. Xero comes with a generic default, and the instinct is to split your sales by product type: singles, sealed, accessories. That feels natural, but for a card business it’s the wrong starting point, and it will cause you problems at your first VAT return.
Split sales by VAT treatment first
The split HMRC actually cares about is how each sale is taxed, and there are three fundamentally different treatments in a card business. Crucially, these don’t map neatly onto product type: a sealed box bought second-hand from a collector qualifies for the VAT Margin Scheme, while a single bought new from a distributor with a VAT invoice does not. What determines the treatment is how the item was acquired and where it’s going — not whether it’s a single or a box.
So structure your sales accounts like this:
|
Sales account |
What it captures and how it’s taxed |
|
Sales – UK – Margin Scheme |
Second-hand stock sold to UK buyers — bought without a VAT invoice (collections, private sellers). VAT is due on the margin only. |
|
Sales – UK – Standard rated |
New/sealed product bought from a VAT-registered distributor with a VAT invoice, sold to UK buyers. Standard 20% on the full price; input VAT reclaimed on the purchase. |
|
Sales – Export (zero-rated) |
All sales shipped outside the UK — EU and rest of world alike. Zero-rated, with evidence of export. Note these come out of the Margin Scheme; the two don’t stack. |
|
Shipping recharged |
Postage collected from buyers at checkout. Income in its own right, with your actual postage as a cost against it — don’t net them off invisibly. |
Two notes on that table. EU and non-EU sit in one account because, for your UK VAT return, they’re treated identically — both are zero-rated exports. (The buyer’s country still matters for import VAT and duty at their end, and for IOSS, but that’s not a UK return question.) And the Margin Scheme is a compliance requirement to keep separable, not a preference — if HMRC can’t see margin-scheme sales distinctly, they can deny the scheme and charge VAT on your full turnover.
Where does product type go?
Into a tracking category, not the chart of accounts. Set up tracking for singles, sealed, accessories and events, and you get the commercial view (what’s selling, what’s profitable) without proliferating nominal codes or muddling the VAT picture. You can then report by product line and by VAT treatment independently — see the divisional-reporting guide.
Cost and expense accounts
|
Expense account |
What it captures |
|
Cost of goods sold – stock |
The cost of cards and product sold. |
|
Grading & authentication |
Slabbing and grading fees — recorded against the specific card (see the stock-valuation guide). |
|
Platform & marketplace fees |
Whatnot, eBay, TCGplayer and Cardmarket commission. |
|
Payment processing fees |
Stripe, PayPal, gateway and card fees. |
|
Postage & packaging |
Courier costs, mailers and packing materials. |
|
Marketing – giveaways |
The postage you absorb on giveaway orders. This is a marketing cost, not negative sales — see below. |
|
Software & subscriptions |
POS/inventory platform, Xero, streaming and design tools. |
|
Trade shows & travel |
Stand fees, travel and accommodation for events. |
Giveaways are a cost, not a negative sale
If you run giveaways on stream, each one costs you the postage even though the item is free — and on a busy week that can be dozens of orders. Your platform report will show them as negative amounts sitting among your sales. Code them to a marketing account instead. Leave them in sales and you understate revenue, distort your margin, and lose sight of what your promotional activity actually costs.
A word on the Margin Scheme in Xero
Worth knowing before you start: Xero has no built-in VAT Margin Scheme tax rate. You can’t simply pick it from the dropdown. In practice it’s handled either by posting the sale gross against a no-VAT code and journaling the margin VAT each quarter (calculated from your stock records outside Xero), or by configuring a custom tax rate. Either way it needs deliberate setup at onboarding rather than being discovered at your first return — which is exactly the kind of thing a sector specialist sets up once, correctly.
The admin side
A few practical tips. Give each account a sensible code so related items group together, and resist creating so many accounts that coding becomes a chore — aim for enough detail to answer real questions, no more. Set the correct default VAT rate on each account so coding is right by default. Keep dedicated accounts for platform fees and processing fees so they never get muddled into sales. And build the export account from day one even if you’re currently UK-only — it costs nothing now and saves an unpleasant retrofit the first time you ship abroad.
