How do I deal with income earned from platform fees or commissions deducted at source?

Understanding what “fees or commissions deducted at source” really means

If you earn money through an online platform, marketplace, agency, app, or intermediary, it’s common for them to take their cut before you ever see the cash. That cut might be described as a platform fee, service fee, commission, processing fee, booking fee, or “merchant fee.” Sometimes it’s a flat amount per transaction. Sometimes it’s a percentage. Sometimes it includes payment processing and taxes. Whatever the label, the practical result is the same: you might complete a job or make a sale worth £100, but you only receive £80 because £20 was withheld by the platform.

For tax and accounting purposes, this setup can be confusing because it creates a gap between the “gross” amount (what the customer paid or what you earned before fees) and the “net” amount (what actually lands in your bank account). Many people accidentally report the net amount as their income, or they report the gross amount without deducting allowable fees, or they mix and match across months, which makes their records messy and can lead to under- or over-reporting.

Dealing with this properly usually comes down to a few simple principles: identify the gross amount you earned, identify the fees and commissions deducted, record both in a consistent way, and understand how those figures flow into your bookkeeping and tax return. The details differ by country and by the type of activity you’re doing (self-employment, trading, rental, royalties, etc.), but the underlying logic stays very similar.

Gross vs net: the key distinction you must get right

Most platforms report earnings in one of two ways: either they show your gross revenue and list fees separately, or they mainly show what they paid out to you and you have to dig for fee details. Your accounting becomes much easier if you always work from the gross figure and treat the platform’s fee as an expense. That approach mirrors the economic reality: you earned the revenue, then paid a cost to access the platform and get paid.

Here’s a simple example. A customer pays £120 for your service. The platform deducts a 15% commission (£18) and a payment processing fee (£2). You receive £100. If you only record £100 as revenue, your books won’t reflect the true scale of your sales, and you’ll lose insight into how expensive the platform is. If you record £120 as revenue and £20 as platform-related expenses, you can see your true margins and you’re less likely to make mistakes when reconciling statements.

That said, some tax regimes and simplified schemes allow or encourage reporting net figures in certain contexts. Even when that’s permitted, you should still track the gross and the fees internally, because (1) it helps you reconcile platform statements, (2) it reduces confusion if the platform issues annual summaries, and (3) it makes it easier to answer questions if you’re ever asked to substantiate your numbers.

Why platforms deduct fees at source

Platforms typically deduct fees at source for a few practical reasons. First, it’s a clean way to get paid. If the platform processes the customer’s payment and controls the transaction, they can automatically take their commission. Second, it reduces non-payment risk: they don’t need to invoice you separately and chase you. Third, it standardizes reporting because the platform can produce consistent statements showing gross sales, returns, taxes collected, and fees.

From your perspective, the deduction is still a cost of earning your income. Whether you pay it later by invoice or it’s removed before payout doesn’t change the fundamental nature of the expense. What changes is the workflow: your bank statement shows net amounts, so you must rely on platform reports to reconstruct gross sales and expenses accurately.

Common income situations where this comes up

Fees deducted at source appear in many settings, including:

1) Selling goods through marketplaces (where the platform takes a commission, listing fee, shipping fee, and payment processing fee).

2) Providing services through gig apps (where the app deducts service fees, booking fees, and payment processing fees).

3) Renting property through booking platforms (where host service fees or guest service fees are involved, sometimes with taxes withheld or collected).

4) Affiliate marketing and creator monetization (where networks take fees, or payouts are reduced by processing costs, chargebacks, or withheld amounts).

5) Agencies and intermediaries that collect from clients and pay you after keeping a commission.

Each of these has its own terminology and reporting screens, but they all boil down to the same accounting question: what was earned, what was withheld, and what landed in your account?

Step 1: Collect the right documents (and don’t rely only on your bank)

If you only look at your bank statements, you’ll typically see the net payouts. That’s not enough to properly separate fees, refunds, and customer taxes. The strongest approach is to save the platform’s transaction-level reports and monthly or weekly statements.

Useful documents usually include:

• A transaction list (each order/job, date, customer payment, fees, taxes, refunds, payout amount).

• A payout statement (what was paid to you, when, and which transactions it includes).

• An annual summary (total gross sales, total fees, total refunds, total taxes collected, total payouts).

Download these regularly. Some platforms only keep a limited history or make it difficult to access older records. A simple habit—saving a PDF statement and exporting a CSV monthly—can save hours later.

Step 2: Decide how you will record your income and fees

There are two common bookkeeping approaches. Which one you choose depends on how detailed you want your books and how many transactions you have.

Approach A: Record gross revenue and record fees as expenses (recommended)

This is the most transparent method and works well for most businesses and freelancers. For each transaction or reporting period, you record the gross revenue. Then you record the platform commission and any processing fees as separate expense lines (or as one combined “platform fees” line if you don’t need to split them).

Example:

• Revenue: £120

• Platform fees expense: £20

• Net payout received: £100

Your accounting system then ties out with your payout statement because the net movement into your bank matches the net after fees.

Approach B: Record only the net payouts as income (use with caution)

Some people record only what hits the bank as income. This can appear simpler, but it can create problems:

• If the platform reports gross income to tax authorities or provides annual summaries in gross terms, your numbers won’t match.

• If there are refunds or chargebacks, they may reduce payouts in a later period, making it hard to see true sales.

• Your expense tracking becomes less accurate because fees are effectively hidden inside your revenue number.

If you must use this approach, you should still keep a parallel record of gross sales and fees so you can reconcile the platform’s annual statements and answer queries.

Step 3: Handle timing differences between sale date and payout date

Platforms often pay you weekly or monthly, and they may hold funds for a period. That means the date you earn the income (sale/job date) may differ from the date you receive the money (payout date). For tax reporting, the correct timing can depend on the accounting basis you use in your country (for example, cash basis vs accrual basis).

If you report on a cash basis, you typically treat the income as received when you are paid. In that case, you still need to know what portion of each payout relates to fees and refunds, but the timing follows the bank deposits.

If you report on an accrual basis, you typically recognize income when it is earned (for example, when the service is performed or the sale is completed) and then treat the unpaid amount as receivable until the platform pays it. This can be more complex but gives a more accurate view of performance over time.

Whichever basis you use, be consistent and make sure your records can be reconciled. A mismatch often happens when people record revenue on the transaction date but record fees on the payout date, or vice versa. Ideally, revenue and associated fees should be recorded in the same period to avoid distorted margins.

Step 4: Reconcile your platform statements to your bank deposits

Reconciliation is the process of proving that the numbers you recorded match reality. With platform income, reconciliation often requires three layers:

• Transaction layer: all orders/jobs for the period, including refunds.

• Payout layer: what the platform says it paid out.

• Bank layer: what you actually received.

A clean reconciliation usually looks like this:

Gross revenue (for transactions included in a payout) minus platform fees minus refunds/chargebacks (plus/minus any adjustments) equals the payout amount. Then the payout amount should match the deposit on your bank statement (allowing for minor timing differences if a payout lands the next day).

If you can’t reconcile, the most common causes are: missing refunds, currency conversion differences, withheld reserves, or payouts that combine multiple periods.

Step 5: Understand which fees are typically deductible and which are not

In many systems, fees and commissions paid to earn income are treated as allowable business expenses, provided the activity is a business or income-generating activity and the expense is incurred wholly and exclusively for that purpose. Platform commissions, payment processing fees, listing fees, and transaction charges commonly fit this category.

However, there can be exceptions or special rules. For example:

• Personal expenses aren’t deductible, even if paid through the platform.

• Fines and penalties are often not deductible.

• Some costs may need to be capitalized rather than expensed if they relate to acquiring a long-term asset.

Because rules vary, the safest general practice is to categorize platform fees clearly and keep the supporting statements. If you’re unsure about a specific charge type (for example, a “marketing boost” fee or a penalty fee), separate it into its own category so you can review it later.

Step 6: Deal with refunds, chargebacks, disputes, and negative payouts

Refunds and chargebacks complicate reporting because they can occur in a different period from the original sale. Platforms might deduct refunds from your future payouts, which can make a later payout smaller or even negative.

A sensible method is to treat refunds as a reduction of revenue (or “sales returns”) rather than as an expense. This keeps your revenue numbers honest. If you record gross revenue for a sale and later it is refunded, you record a negative revenue entry for the refund. If fees are refunded too, you record an offsetting entry reducing the platform fees expense. If the platform keeps some fees even after a refund, that retained fee stays as an expense.

Chargebacks are similar, but they sometimes carry additional fees. Keep those additional chargeback fees separate if you can, because they are useful to monitor: high chargebacks can be a warning sign in certain business models.

Step 7: Account for tips, bonuses, incentives, and adjustments

Many platforms add extra earnings beyond the basic transaction amount: tips, surge pricing, referral bonuses, performance incentives, or promotional top-ups. These may appear as separate lines in your platform statement, and they might be paid with different timing.

For clean records, treat them as part of your income, but categorize them in a way that makes analysis easy. For example, you might have “Service income,” “Tips,” and “Platform incentives.” This helps you see what portion of your earnings is predictable and what portion depends on platform promotions.

Also watch for “adjustments” lines. Platforms sometimes correct prior transactions, apply reserves, or settle disputes. Don’t ignore these. Each adjustment should map to a real explanation in the statement, and you should include it in your reconciliation.

Step 8: Multi-currency payouts and conversion fees

If you sell to customers in different currencies, platforms might convert your earnings before paying you, or they might pay you in the original currency. Either way, currency conversion adds complexity because your net payout can differ from the gross amounts due to exchange rates and conversion fees.

Good practice includes:

• Record the gross sale in the original currency and convert using a consistent method if your accounting is in a home currency.

• Record conversion fees separately if the platform shows them.

• Expect small differences due to exchange rate timing (transaction date rate vs payout date rate).

If you have many foreign currency transactions, consider using software or an accounting workflow that handles multi-currency well. Otherwise, you’ll spend too much time chasing small differences.

Step 9: Taxes collected by the platform are not the same as your income

Some platforms collect taxes from customers (such as sales tax, VAT, GST, or local occupancy taxes for rentals) and either remit them directly or include them in statements. A very common mistake is to treat taxes collected as part of your income. In many cases, those taxes are not your revenue; you’re simply facilitating collection, or the platform is doing it on behalf of the transaction.

Ideally, your reporting separates:

• The selling price of your goods/services (your revenue)

• Taxes collected from the customer

• Platform fees and commissions

• Net payout

If a platform collects and remits taxes, you might never receive those tax amounts. Even if they appear in “gross collected” figures, they may not be part of your taxable income as business revenue. Keep the platform’s tax statements so you can demonstrate how taxes were handled.

Step 10: Withholding taxes and “deducted at source” that are actually taxes

Sometimes the phrase “deducted at source” refers not only to platform commissions but also to tax withholding. This can happen if the platform is required to withhold income tax in certain jurisdictions, or if cross-border payments trigger withholding rules, or if you didn’t provide required tax details and the platform applied a default withholding rate.

When the deduction is a tax withholding rather than a platform fee, it should be treated differently. A platform fee is typically an expense. A withheld tax is typically a prepayment of tax (a credit) that may reduce the tax you owe when you file, depending on your circumstances and local rules.

The key is to identify what the deduction actually is. Platforms often label these lines clearly as “withholding,” “backup withholding,” “tax withheld,” or similar. If it is a tax withheld, you should retain the relevant tax form or annual statement showing the amount withheld and the period it relates to. In your records, you generally track it as “tax paid/withheld” rather than as a platform expense.

Step 11: Choosing categories in your bookkeeping system

To keep things tidy, set up clear categories. A simple structure often works better than an overly detailed one you never maintain.

Common categories might include:

• Revenue: Sales / Service income

• Revenue: Tips / Bonuses (optional)

• Contra-revenue: Refunds / Returns

• Expenses: Platform commissions

• Expenses: Payment processing fees

• Expenses: Advertising/Promotions (if you pay for boosts or ads)

• Taxes: Withholding tax (if applicable)

If you sell physical goods, you may also need categories for shipping charges, fulfillment fees, and cost of goods sold. Some platforms bundle fulfillment fees and shipping labels into their own fee lines; separate them if you want to understand the true cost of delivery versus platform commission.

Step 12: Practical recording methods for different transaction volumes

Your workflow should match your volume.

Low volume (a few transactions per month)

For low volume, you can record each transaction manually: gross amount as revenue, fees as expenses, and match the net payout to your bank deposit. Keep copies of invoices/receipts and platform statements. A spreadsheet can be enough if it’s well-structured and you’re consistent.

Medium volume (dozens to hundreds per month)

At this level, manual entry can become error-prone. Consider importing CSV exports into your accounting system or using an integration tool. You might record weekly or monthly totals instead of each transaction, as long as your totals reconcile and you can produce transaction details if required.

High volume (hundreds to thousands per month)

High volume usually calls for automation. You’ll want either direct integrations, dedicated connectors, or specialized e-commerce accounting tools. Often you’ll record summarized journal entries by period, broken down into revenue, taxes, fees, refunds, and payouts. The goal is to preserve accuracy without drowning in line-by-line bookkeeping.

Step 13: What to do when platform statements don’t match your expectations

If your platform statement says you earned one amount but your payout is lower than expected, look for these common explanations:

• Rolling reserves: platforms sometimes hold a percentage to cover future refunds or disputes.

• Payout thresholds: you might need to reach a minimum before being paid.

• Timing cutoffs: some transactions are included in the next payout cycle.

• Adjustments: prior period corrections or fees.

• Currency conversion: exchange rates and conversion fees.

• Taxes withheld: income tax withholding or local tax requirements.

When you find the cause, document it. A short note in your bookkeeping (for example, “£150 held in reserve; expected release next month”) helps future-you understand why reconciliation differed.

Step 14: How this affects profit, not just tax

Even if you’re mainly focused on “what do I report,” the way you handle fees impacts how you understand your business. If you report only net payouts as revenue, you might think you have a smaller business than you do, and you’ll struggle to compare platform options.

When you track gross sales and platform fees separately, you can answer helpful questions:

• What percentage of my revenue goes to platform fees?

• Are fees rising over time?

• Is one platform more profitable than another after fees?

• How do refunds affect my true margin?

These insights can inform pricing, marketing, and whether to diversify away from a platform that’s too expensive.

Step 15: Typical mistakes (and how to avoid them)

Here are mistakes that show up again and again:

• Reporting only the net payouts without tracking fees, then being surprised when annual summaries show higher gross figures.

• Double-counting income by recording gross sales and also recording payouts as income.

• Ignoring refunds because “it already came out of the payout,” leading to overstated revenue.

• Categorizing withheld taxes as platform fees, losing track of potential tax credits.

• Mixing accounting periods by recording sales on transaction date and fees on payout date inconsistently.

• Not saving statements, then scrambling at year-end when the platform changes the dashboard or limits exports.

You avoid most of these by adopting a repeatable monthly routine: download statements, record gross and fees consistently, reconcile payouts to the bank, and file your statements in a clearly labeled folder.

Step 16: A simple monthly routine you can actually stick to

If you want a straightforward process, try this:

1) Export the platform’s monthly statement and transaction CSV.

2) Note totals: gross sales, refunds, platform fees, taxes collected/remitted, other adjustments, net payout.

3) Record a summarized entry in your bookkeeping system for the month (or import transactions if you prefer detail).

4) Match the net payout total to bank deposits. If deposits are split across days, match each payout individually.

5) Flag anything unusual: reserves, large adjustments, negative payouts.

6) Store documents in a folder named by year and month.

This routine is simple, scalable, and reduces year-end stress dramatically.

Step 17: How to think about “commission deducted at source” when setting your prices

Fees deducted at source affect your pricing decisions. If you price a service at £50 but the platform takes 20%, you are effectively pricing at £40 before other costs. If you also have materials, travel, or advertising costs, your margin can shrink fast.

A practical way to set prices is to work backwards from your desired net revenue. Decide what you want to earn after fees, then divide by (1 - fee percentage). For example, if you want £80 and the commission is 20%, you would set a gross price of £80 / 0.8 = £100 (before any other costs). If there are additional fixed fees per transaction, add those in as well.

This isn’t a tax rule; it’s a business reality rule. Tracking gross and fees accurately helps you see whether your pricing still works after platform changes or promotional discounts.

Step 18: When you might need professional help

Many people can handle platform fees with a good spreadsheet or basic bookkeeping setup, but there are situations where it’s worth getting tailored advice:

• You operate in multiple countries or sell cross-border and aren’t sure how taxes collected by platforms apply to you.

• The platform withholds taxes and you need to claim credits or reconcile withheld amounts.

• You have high transaction volume and need an automated workflow to avoid errors.

• You’re changing from cash basis to accrual basis, or starting a company, or registering for a tax scheme that changes how you report.

• You’re unsure whether your activity is a hobby, side income, or a business under your local rules.

Even then, you can keep costs down by doing the data preparation yourself: download statements, reconcile payouts, and provide a clear summary of totals. Professionals work faster (and charge less) when your records are organized.

Step 19: A worked example you can adapt

Imagine you’re a designer selling digital templates on a platform. In January, you have:

• Customer payments (gross): £2,000

• Platform commission (10%): £200

• Payment processing fees: £60

• Refunds: £100

• Net payout: £1,640

One clean way to record this is:

• Revenue: £2,000

• Contra-revenue (refunds): -£100

• Expenses (platform fees): £200

• Expenses (processing fees): £60

Then, when the £1,640 lands in your bank, you match it to the month’s payout. Your net profit impact from platform charges is easy to see, and your revenue reporting remains consistent with platform summaries that typically report gross sales and refunds.

Step 20: Final checklist for handling income with fees deducted at source

To deal with income earned from platform fees or commissions deducted at source, you want to be able to answer these questions for any period:

• What was the gross amount earned from customers?

• How much was deducted for platform commissions and processing fees?

• How much was refunded or charged back?

• Were any taxes collected or withheld, and how are they shown on statements?

• What net amount was paid out, and does it match the bank deposits?

If you can answer those consistently, your reporting becomes straightforward. You’ll reduce the risk of misreporting, you’ll reconcile faster, and you’ll understand the true cost of earning through each platform.

Most importantly, remember that the cash you receive is not always the same as the income you earned. The platform’s cut doesn’t erase the underlying transaction—it’s simply a cost of doing business through that channel. Track the gross, track the fees, reconcile the payout, and you’ll have records you can trust year after year.