"My TikTok Shop does about £1m of sales a year. How much of it do I actually keep?" I hear that question from supplement founders more than any other, usually just after they have watched a settlement land that looks nothing like the sales screen. Here is the direct answer. On the numbers that work, a £1m net sales brand keeps roughly £138,500 of profit after corporation tax, with a modest founder salary paid along the way. Squeeze the same brand with heavy creator and ad spend and the keep drops to about £83,000. Most of the million never was yours to keep. This post shows exactly where it goes.
Here's the Short Version
- Decide which million you mean first. A £1m net sales brand takes about £1.2m from customers, because supplements carry 20% VAT. £200,000 of the takings is the taxman's before you touch it
- In the illustrative example below, the £1m of net revenue becomes £720,000 of gross profit after 28% cost of goods, then the selling stack takes its cut: TikTok commission and parcel fees net of VAT about 10.7%, fulfilment 8%, creators and ads 17.5%
- Contribution after the selling costs is £358,333, 35.8% of revenue. Overheads of £175,000 leave £183,333 of profit before tax, 18.3%
- Corporation tax on £183,333 of profit is about £44,800 at 2026 rates, an effective rate near 24.5% because of marginal relief. Retained profit after tax: about £138,500, 13.9p of every net sales pound
- Push creators and ads to 25% of revenue and the same brand retains about £83,400 after tax. Between those two versions of the same brand, the keep runs from about 8p to 14p for every £1 of net sales
- "Kept" is not the same as "in the bank". Settlement timing, reserves, quarterly VAT and stock all sit between your profit and your cash
First, Decide Which £1m You Mean
Founders quote their million loosely, and the looseness hides the first leak. When an accountant says a brand does £1m, they mean net sales, revenue net of VAT, the number that goes on your tax return as turnover. When a founder says the same thing, they usually mean what customers paid, VAT included. On supplements the two differ by 20%, and that difference is not profit, it is a tax you collect and hand over.
So fix the frame for this whole post: the illustrative brand sells £1m net of VAT, which means customer takings of £1.2m. At an average order of £30 including VAT, that is 40,000 orders a year, about 110 a day. Supplements are standard rated for VAT at 20%, unlike most food, and you collect the VAT on every order whether you thought about it or not. If you have been celebrating a £1m takings year as £1m of revenue, the actual revenue is £833,333 and the rest was output VAT. We covered this gap in our post on VAT for ecommerce brands growing past the threshold, and it is the first place "keeps" goes missing.
The Waterfall From £1m to the Bank
Here is the whole journey in one table. Every figure is an illustrative example with synthetic numbers, built to show the shape and the arithmetic, not any client's books. Your mix will differ. The assumptions: a supplement brand doing £1m of net sales entirely through TikTok Shop UK, fulfilling from its own 3PL, paying creators on 60% of orders at an average 12.5%, and spending 10% of net revenue on TikTok ads. Every order is £30 including VAT, with no separate shipping charge and no platform funded discounts, so the commission base is the full customer price. Fee lines are shown net of the input VAT a registered seller reclaims, and the 9% commission applies to the VAT inclusive customer price, as it does on TikTok.
| Line | Amount | Share of net revenue |
|---|---|---|
| Customer takings, VAT included | £1,200,000 | |
| Output VAT at 20% | (£200,000) | |
| Revenue, net of VAT | £1,000,000 | 100% |
| Cost of goods sold | (£280,000) | 28% |
| Gross profit | £720,000 | 72% |
| TikTok commission: 9% incl VAT on takings, £108,000 charged, £18,000 VAT reclaimed | (£90,000) | 9% |
| TikTok parcel fees: 50p incl VAT on 40,000 parcels, £20,000 charged, £3,333 VAT reclaimed | (£16,667) | 1.7% |
| Fulfilment through a 3PL at £2 per parcel | (£80,000) | 8% |
| Creator commissions: 60% of orders at 12.5% | (£75,000) | 7.5% |
| TikTok advertising | (£100,000) | 10% |
| Contribution before overheads | £358,333 | 35.8% |
| Overheads: team, software, compliance, insurance, founder salary | (£175,000) | 17.5% |
| Profit before tax | £183,333 | 18.3% |
| Corporation tax | (£44,833) | 4.5% |
| Retained profit after tax | £138,500 | 13.9% |
Read it from the top and the story writes itself. The £1.2m of takings is really £1m of revenue, and the £1m is really £720,000 of gross profit once the product is made. The platform and fulfilment take £186,667 before a single creator is paid or an ad runs, and we detailed every one of those platform charges in our post on the real TikTok Shop cost stack for a supplement brand, so I will not repeat the full fee tour here. Creators and ads take £175,000, because on TikTok that is not optional spend, it is the machine that sells the product. Overheads take £175,000. What survives every layer is £183,333 of profit, and the taxman takes £44,833 of that. The brand keeps £138,500.
Notice what is doing the damage, because it surprises most founders. The platform is not the villain at this size: commission and parcel fees net of VAT cost 10.7p of every pound. Creators, ads and fulfilment together cost 25.5p. The founder's mental model is usually the reverse, that TikTok eats the business and marketing is a rounding error. On the real shape of the money, marketing is the biggest controllable line in the whole stack, which is why the sensitivity below matters more than any fee negotiation.
What the Taxman Takes
Corporation tax on the illustrative profit of £183,333 is about £44,800. The headline rates are 19% on profits up to £50,000, 25% on profits over £250,000, and marginal relief in between, which is where this brand sits. The relief works by charging 25% and then knocking off 3/200 of the gap between your profit and £250,000. On £183,333 the knock off is about £1,000, so the effective rate is just under 24.5%, not 19% and not 25%. A common mistake is planning on 19% because the brand "is small". Once you are over £50,000 of profit the 19% rate is gone, and the effective rate climbs quickly towards 25%.
Two further tax points matter to a brand keeping this kind of money. First, assuming a 12 month accounting period and no associated companies, the £44,800 bill is due 9 months and 1 day after your year end, with no quarterly instalments at this profit level, so it is one large lump the calendar will not remind you about. Second, if you have associated companies, the £50,000 and £250,000 limits are divided between them, which can push a modest profit into the 25% zone faster than you expect. And the profit figure the tax is charged on is not the cash in your bank. Stock you bought but have not sold stays on the balance sheet and only reduces taxable profit when it sells, unless a valid write down applies. Equipment gets relief through capital allowances, not when the invoice is paid. Marketing is normally deductible in the year it is incurred. The upshot is the same: a cash rich autumn can still produce a painful bill the following spring. If your year end is approaching, model the bill before it lands, not after.
Why £138,500 of Profit Can Feel Like Nothing in the Bank
Here is where founders stop trusting accountants, because the retained profit says £138,500 and the bank account says otherwise. Both are right. Profit is an accounting view of the year. Cash is a timing view of the money, and on TikTok Shop the timing is brutal.
TikTok settles from delivery, and your settlement period depends on seller status and performance: 31 days for introductory or deferred sellers, 8 for standard, 3 for accelerated, 1 for express, with reserves that can hold part of a qualifying seller's funds until 30 calendar days after delivery and a bank transfer that usually takes another three business days. A brand taking £100,000 a month including VAT has £25,000 or more sitting in TikTok's pipeline on an 8 day cycle, and the best part of £100,000 on the 31 day cycle a new shop starts on. That is before refunds, creator commissions and fees are netted out of settlements, and before the stock that made the £1m of sales is paid for. The stock was bought months before the sales happened, and the next stock order is due before the last settlement clears. Add your net VAT, the output VAT you collect less the input VAT you reclaim, which goes to HMRC quarterly in one go, and you can see why a profitable £1m brand regularly runs on a knife edge. Our post on the £1m revenue trap is the full story of how brands get profitable and broke at the same time, and the practical version for TikTok is in our post on scaling a TikTok Shop without running out of cash.
So "keeps" has three layers, and conflating them is how founders mislead themselves. The company keeps £138,500 of profit on paper. The bank keeps a fraction of it at any moment, because of settlement cycles, stock and VAT timing. And the founder keeps what they pay themselves, which is a separate decision with its own tax arithmetic, covered in our post on what a 7 figure supplement brand should pay its founder.
The Two Levers That Decide 14p or 8p
The waterfall above assumed creators and ads at 17.5% of revenue and overheads at 17.5%. Move either and the keep rate moves hard, because every extra pound of cost comes straight out of the bottom line after the platform has taken its cut.
Take the marketing lever first, because it is where TikTok brands bleed. Push creators and ads together to 25% of net revenue, an easy place to land when you are chasing growth, and the contribution falls to £283,333. Overheads unchanged, profit before tax is £108,333, corporation tax is about £24,958, and retained profit after tax is about £83,400. The same brand, same product, same prices, and £55,000 less kept, which is 40% of the lean version's retained profit gone to extra spend that may or may not have bought growth. Our piece on net profit versus ROAS is about exactly this confusion, because a great ROAS on a fat ad budget can still mean a falling keep rate.
Now the overhead lever. £175,000 of overheads for a £1m brand means a small team, sensible software and no vanity costs. Add £25,000 of overhead, a second hire or nicer tools, and profit before tax falls to £158,333. Corporation tax falls to about £38,208, so retained profit after tax drops by £18,375, not £25,000, because the extra cost saves tax at the marginal rate. Between the two levers you can model almost any outcome, which is why we built the TikTok Shop profit calculator: so you can put your own creator rates, ad spend and overheads in and see the keep rate before you commit to them, not after a year of settlement surprises.
Three Checks to Run This Month
You do not need a finance team to find out which version of the story you are living. Run these three checks on your own numbers.
Check one: what is your real net revenue? Take last year's customer takings and divide by 1.2. That is your turnover for the year, and every percentage in this post should be measured against it. Measure against takings instead and every ratio is flattered: net revenue is five sixths of what customers paid, so a cost that looks like 20% of takings is really 24% of net revenue.
Check two: what does your selling stack cost, net of VAT? Add TikTok commission and fees, fulfilment and creator costs for the year, strip the VAT out of the platform fees, and divide by net revenue. The healthy range for a supplement brand is 25% to 35% depending on creator and ad intensity. If you are north of 35%, the pricing is wrong, the creator rates are wrong, or the ad account is the business model.
Check three: does your bank match your profit? Reconcile the last three months of settlements against your sales dashboard, refunds, fees and reserves. If you cannot explain the gap to the pound, you do not yet know your keep rate, because the money is moving on TikTok's timetable, not yours. Our post on why TikTok Shop brands fail at reconciliation lists the exact failure points, and the fix is a monthly bridge from gross sales to net cash.
FAQ
How much profit should a £1m TikTok Shop supplement brand make?
In the illustrative example in this post, £183,333 before tax, which is 18.3% of net revenue, and about £138,500 retained after corporation tax. Push marketing to 25% of revenue and the retained figure falls to about £83,400. Between the two scenarios, a well run brand keeps roughly 8p to 14p after tax for every £1 of net sales.
How much of my TikTok Shop sales is VAT?
One sixth of customer takings on standard rated products, because £1.20 including VAT contains 20p of VAT. On £1.2m of takings that is £200,000 of output VAT, which you collect on every sale and pay over quarterly, net of the input VAT you reclaim on your costs. Supplements are standard rated at 20%, unlike most food.
Why is my bank balance lower than my profit says it should be?
Because profit is a year long view and cash is a timing view. Settlements lag deliveries by days or weeks, TikTok can hold reserves, stock is paid for months before it sells, and VAT goes out quarterly in one lump. A profitable brand can still be cash poor, which is why the monthly reconciliation in this post matters.
Does the 9% TikTok commission apply to my full selling price?
Yes. TikTok charges 9% including VAT on net sales plus any customer paid shipping and TikTok funded discounts, less related refunds. In this post's model there is no separate shipping charge and no platform funded discount, so the base is the £30 customer price, and a registered seller reclaims the VAT inside the fee, so it nets to 7.5% of the customer price. The standard rate has been 9% since 2 September 2024, when it rose from 5%, and eligible category, new seller and Seller Mission reductions can change the rate you actually pay.
The Bottom Line
A £1m TikTok Shop supplement brand is a £1.2m takings business with £200,000 of output VAT, a £280,000 product bill and a £360,000 selling stack before it has paid anyone a salary. Get the structure right and the company keeps about £138,500 after corporation tax, with the founder salary already inside the overheads. Get marketing or overheads wrong and the keep halves. The founders who keep the most track the standard 9% commission and any reduction that actually applies to them. Then they obsess over net revenue, the fee lines net of VAT, the creator and ad bill as a percentage of that revenue, and the monthly bridge between the dashboard and the bank. The million is the headline. What you keep is the business.
If you want us to run your actual settlement history and P&L through this waterfall and tell you what your brand really keeps, that is exactly the review we do. We are specialist social commerce accountants, we work with UK ecommerce brands from £1m to £20m, and we see TikTok Shop settlements every day. Book a call and we will show you where your money is going, in numbers.