I sold a presale item with 'Buyer Pays' postage, but due to how long item took to arrive, ebay have now refunded the postage to buyer and I can no longer access a prepaid label. Is this correct? Did I list the item incorrectly? I wanted to use the ebay simple delivery method but is my only option now to pay out of pocket at the post office

You need to be registered as a Business Seller in order to sell presale items as you are buying items with the specific intention of reselling them. A Private Seller account is only for people selling unwanted personal possessions. You would then be able to set your own postage instead of having to use Simple Delivery which isn't compatible with presale items. In this instance, since the Simple Delivery has expired you will have to buy your own postage.

Presale Item had Postage Refunded to Buyer | Postage

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Presale Item had Postage Refunded to Buyer | Postage | eBay UK