sales tax for the online seller

What Taxes Do I Need to Pay as an Online Seller?

29/09/2022Tax Issues , Tax Saving Tips

This is the era where online platforms and buying & selling products are actively becoming more and more popular. This results in a sudden rise in the demands of e-commerce and other such start-ups. Online shops are the best set-up for small businesses and even you can start it from the comfortable environment of your home. This is considered a lucrative way to step into the business world. This allows you to have to avail the business opportunity according to your suitably whether you want to take it as a full-time job or part-time job. However, you can choose any option that suits you more but be considerate about sales tax for the online seller.

Like any other business that is selling the products or services physically, you will have to pay tax and the liabilities will be equally serious in the case of online selling. When you are self-employed and running an online selling business, you will have to submit your self-assessment tax returns and declare all of your income streams to HMRC. In order to ensure the long-term growth of your business, you will have to pay the online sales tax. This guide will further help you to understand what is online sales tax, how much will you pay as an online seller, and what are mandatory taxes you can not avoid.


Reach out to our smart team of professionals to get your sales tax for the online seller queries answered quickly. We will help to let you decide about tax relief with a clear mind.


What is the Online Sales Tax?

There are multiple options that are being explored to get an introduction to the sales tax for the online seller. This will even help to shift shopping habits. Online sellers will more likely to be involved in the same kind of tax that a physical retailer who is physically struggling in the market will pay.

There is also a consideration of the charges that will be charged to the customers who will like to receive their products in the comfort of home through online platforms. If you are associated with e-commerce trading, you will have to hire a specialist who will give you enough knowledge to understand your tax liabilities.


What is the Sales Tax for the Online Seller?

If you are a seller who is associated with the online marketplace, you will not be required to pay any tax to HMRC unless your earnings cross a certain limit of the threshold. Moreover, in the case you are associated with the marketplace or with eBay and amazon which is helping you earn more than the limit threshold, there are chances of tax liabilities. You will have to reach out to HMRC to declare your income and fulfil your tax responsibilities as a self-employed businessperson.

This depends on the structure of your business which will decide what type of tax you will have to pay. However, the possible tax implications will come along with your tax liabilities.


1- National Insurance

People who pay the amount for the national insurance, this makes them enjoy the benefits like pensions and other government benefits. Your employment status matters a lot in the case of government benefits. This will check the type of business that you are carrying out and whether you have hired any employees to work for your business or not. In case of being the director of a limited company, Class 1 NICs will be applicable to you and you will have to pay it through the PAYE system. The same goes for the employees of companies.


2- Income Tax

We have heard that some of the income sources are taxable. However, income tax is applicable to your tax liabilities when you are associated with employment earnings, online selling through an online marketplace, or any other pension and relevant profits. If you aim to report your earnings to HMRC, there is an app for paying income tax. You can simply use the app rather than go through the process of self-assessment tax returns.

Moreover, there is a certain amount available also for income tax relief. The first  £1,000 earned through your self-employed online business will not bring in any tax liabilities, This is also known as the trading allowance.


3- Value Added Tax (VAT)

VAT is applicable to the online selling of products and services. You will have to be a VAT-registered business for this. It is possible at any moment that you have decided to be a VAT-registered business. At the initial level of the business, being a VAT-registered business is not mandatory. However, once your earnings reach a certain level, you will have to do it as soon as possible.


4- Corporation Tax

Annual Corporation Tax Return is mandatory when you are associated with an online selling business. You will have to submit it to HMRC. In the previous years, when your business is outside of the UK, you were not liable to pay corporation tax. However, after the changes in tax rules, non-resident businesses are also coming under the list of businesses that will pay the corporation tax.


The Bottom Line

Now that you have gathered a fair amount of information about sales tax for the online seller, we can bring the discussion towards wrapping up. Online selling is a good way to earn extra money by setting up your business in an online marketplace, that too from the comfort of your home. However, once your business reaches a certain limit threshold, the tax implications will start and you will have to fulfil it without finding an escape. We hope these few minutes of reading have helped you to develop a better understanding of sales tax for online sellers.


Our team of professional members loves to hear out your tax problems and find out the possible and suitable solutions quickly. Get in touch now and we will come up with fine solutions.


Disclaimer: The information about sales tax for the online seller provided in this blog includes text and graphics that are general. This does not intend to disregard any of the professional advice.

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