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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Difference between sales tax and VAT
Difference Between Sales Tax and VAT

08/07/2022Tax Issues , Taxation

The development of a country’s economy has a lot to do with tax and related policies. There is a possibility of the production of the growth of the economy through the policies of taxation before the time as well. Due to this, the professionals keep on updating and making new policies with the help of finance experts. To make such decisions, the growth and capacity of people who will pay the tax are considered every year. People tend to confuse the difference between sales tax and VAT. Keeping this in mind, we aim to make this clear in this guide. VAT and sales tax are known to be the two popular tax structures. Their structure came into being a long time ago. This is certain that both VAT and sales tax serve the same cause as both of them are meant to apply to the services and products offered by different systems. However, there are still some differences that make them both define uniquely. We have gathered a basic and introductory explanation of VAT and sales tax along with the prominent differences between them.   Get in touch with one of our experts if you are stuck with your sales or value-added tax. We will offer to provide instant help.    What is Value Added Tax VAT is the abbreviation of value-added tax. It is a system that is multi-stagged taxation. At the level of production, VAT is the kind of tax that is charged whenever a value is added. VAT is paid by the consumer and it tends to increment at every stage of the production of whatever product your business offers. In the case of shared services, VAT is compensated as well. VAT is not meant to charge on each step of the production. When it comes to export, VAT is not charged and exports are considered exempt from this. It is vital to keep in knowledge that when a buyer pays the amount of money to purchase your service or product, the cost of material used in the production will be subtracted. Moreover, VAT is a standardised model and does not tend to affect the customers more than the income tax. individuals with lower income find it difficult in the longer run. Because VAT cumulates at the production stage, it is known as cascading tax. VAT is not affected by the income of the taxpayers because it is allowed to charge only on the utilised products and services. Unlike the case of income tax where the tax percentage is more if one earns more money. VAT is equal for all the consumers who use your services and products.   An Introduction to Sales Tax When it comes to the sales tax, it is charged on a product at the time of sale. It is known as the consumption tax that applies at the point of sale of any products or services. The formula for sales tax collection is easy and simple. When a consumer purchases any product, the retailer will collect it and submits it to the government. All the businesses come under the liability of the sales tax. The total value of the product is charged with the sales tax. Unlike VAT which is shared on every level of the production stage when value is added to the product, sales tax is known for adding to the cost of the product. The value of the product is changed due to this and the tax will be collected in this process as well. According to the research of economists, sales tax does not involve any harmful factors to intervene in the growth of the economy. This is because the sales tax does not change as the income or business profit of the consumer changes.   Difference Between Sales Tax and VAT The prominent difference between VAT and sales tax is the way it is applied to a commodity. Other prominent features that belong to these types of taxation structures are listed and explained below: The application of the tax in both structures is different. Because in the case of VAT, it is allowed to charge tax at every level of production while sales tax is charged on the cost of the product when it is time to sell the product. VAT is known as a taxation system that is multi-stagged and tends to cascade at all levels of production. On the other hand, sales tax is known to be a single-point ta system. It is not possible to evade VAT, however, there are legal possibilities to evade sales tax. VAT is a tax type that belongs to the vale added stages of a product whereas sales tax belongs to the single-stage when the overall value of the product is finalised. VAT is supposed to be a burden that is given to all the manufacturing entities right from the initial stage of production till the product is finalised. However, sales tax is only for the end-user to be paid.   The Bottom Line Now that you have gathered a fair amount of information about the difference between sales tax and VAT, we can bring the discussion toward wrapping up. We can sum up by saying that VAT and sales tax are two prominent structures of the taxation system that are mainly used to charge tax on the products and services offered by businesses. However, the way both VAT and sales tax is applied to the products is different from each other. Which makes each tax structure different and unique in its way. We hope these few minutes of reading will help you to develop a better understanding and help you to deal with the taxation systems more professionally.   Reach out to our young, clever, tech-driven team members to learn the difference between sales tax and VAT. Call us on 02086868876 or email us today.   Disclaimer: The information about the difference between sales tax and VAT provided in this blog includes text and graphics in general. This does …

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business sales tax
What Is Business Sales Tax? (A Simple Guide)

23/06/2022Accounting , Tax Issues , Taxation

Business Sales Tax is an important source of revenue for the government. In the United Kingdom, the business sales tax is collected in the form of Value Added Tax (VAT). The government charges different rates for different types of businesses and customers. Interestingly, business sales tax or VAT is added to the price of the product that the government receives from the sellers. However, different states in a country levy different tax rates in a country. In the UK, the Vat rate is standard which varies slightly depending on the products and customers. In this blog, we will walk you through the business sales tax or VAT and what are the different VAT rates and how one can reduce this tax in the United Kingdom. So, let’s start our discussion!   Let’s seek the help of the world’s best accountants at the CruseBurke for the accounting problems of your business. Give us a call at 02086868876 or send us an email today.   What is Business Sales Tax or VAT? Buying goods and services in the United Kingdom requires the payment of sales tax by the customers. For this, the price of products has already included the Value Added Tax. Value Added Tax (VAT) is a consumption tax and is the third-largest source of generating revenues in the UK after the income tax and National Insurance Contributions. VAT is the tax credit added at each stage of production. The standard rate of VAT is 20% on different consumer goods and services. Besides, other consumption items might have lower VAT rates depending on the specific conditions. Similarly, the UK government has removed some of the consumption items from the VAT list due to certain reasons. Let’s discuss the different rates of business sales tax or VAT and how it works in the UK!   Different VAT Rates in the UK In the UK, a standard VAT rate is used for almost every consumer good and product. However, this rate is reduced for certain types of goods. On the other hand, some consumer goods are exempted from this Vat rate.  This rate is lowered to 5% for the goods like children’s car seats and energy-saving materials at home. The zero Vat tax rate is applicable for those products essential for survival like basic food items and children’s clothes. In other words, most food products and drinks do not come under the UK’s VAT system. For example, some luxurious food items like confectionery, alcoholic products, ice creams, snacks, soft drinks & mineral water. Similarly, disabled persons and persons with chronic diseases will not have to pay any VAT or sales tax in the UK.   How to Calculate the Vat Rate or Business Sales Tax? Calculating business sales tax is very simple. A simple multiplication of the price of the product with the standard Vat rate or the reduction can give you the VAT value. This value is then added to the price, giving you the total price of the product. Here is the formula for calculating the Vat rate or duty. Business Sales Tax or Vat: Price of the Product * Vat Rate After calculating the business sales tax, add the value to the original price to obtain the total price of the product. Total Price = Original Price + Business Sales Tax or Vat rate Example For example, company A produces and supplies the products at a price of £500. The Business sales tax will be equal to: Business Sales Tax or the Vat = Price of the Product * Vat Rate = £500 * 20% = £500 * 0.2 =  £100 It means £100 will be the Vat rate and it will be included in the original price of the product. So, the Vat-included or final price of the product will be: Total Price = Original Price + Business sales Tax or the Vat =           £500  +    £100 =             £600 As you can see the final price increases by the Vat rate. On the other hand, the sellers deduct this amount from the price and pay this tax to the government.   Eligibility for the Reduced Vat Rate To be eligible for the reduced or no Vat duty calls for the certain benefits enjoyed by the different people. Only in the following case, one will be eligible for getting a reduced Vat rate. A person of the age of 60 or more Child Tax Credit (but not the family element) Council Tax Benefit Disability Living Allowance Personal Independence Payment A disablement pension Housing Benefit Jobseeker’s Allowance (income-based) Income Support War Disablement Pension Working Tax Credit Similarly, the cost of the product also counted for the Vat rate. If the cost is not more than 60% of the total cost of the installation of the product, the reduced rate of 5% will be applicable.   The Bottom Line In conclusion, the sales tax is an important part of the government’s revenue generation process in the world. In other countries, the rates vary from one state to another. However, there is a standard rate of 20% Vat on consumer goods. This rate can be lowered by fulfilling certain criteria. For example, if you are above the age of 60, you will be charged a lower tax rate. However, if you qualify for certain conditions, you can enjoy a reduced VAT rate of 5%. Disabled persons or persons with a long-term illness are exempted from the Value Added Tax (VAT). Similarly, all the essential consumption goods are not included in the Vat system. Calculating a tax on the business sales is simpler and requires a simple multiplication of the price and the Vat rate. Adding this price to the original price gives the final price of the product. So, you can calculate the business sales tax yourself if you run a business for consumer goods.   Struggling to sort out your accounting issues? Why not get help from our professional …

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