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A guide to tax for online sellers

2-minute read

Anna Delves

18 August 2020

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Setting up as an online seller is a great option for people who are already small business owners as well as those looking to get started – particularly in the wake of Covid-19.

Unfortunately, like with offline businesses, there are taxes you need to pay – and the government is considering a new 2% sales tax for online businesses.

We’ll guide you through the taxes you may need to pay as an online seller so you can make sure you’re set up for success.

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Do I need to pay taxes if I’m an online seller?

If you’re self employed in any capacity, you'll need to register with HMRC and complete an annual Self Assessment Tax Return, and that includes being an online seller.

However, there are times where you might sell online and it's not as part of your business activity – for example, if you’re doing a few one-off sales on sites like eBay to shift possessions you no longer need or want, or to raise emergency funds.

In cases like that, you won’t need to pay tax as a self-employed person.

How much can you sell before you have to pay taxes?

As of 2017, you’re allowed to earn up to £1,000 in online sales before you need to pay tax.

This doesn’t just apply to eBay, but to other selling platforms such as Gumtree, Depop and Etsy.

In 2016, the Finance Act empowered HMRC to look into those who’re selling online. The aim is to crack down on those who’re evading tax through online selling.

If HMRC class you as an online seller, you will need to pay income tax on your earnings.

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New online sales tax

At the moment, the government are considering a new 2 per cent sales tax for online sellers.

The aim is to give the high street a boost by giving brick-and-mortar shops a slight price advantage.

Another idea they’re considering is charging home delivery customers a surcharge for having online goods delivered.

Both are part of a wider review into business rates, which the government launched as a consultation in July. The consultation will close in September, after which any changes they decide to make may then be introduced by Spring 2021.

What other taxes might I have to pay as an online seller?

Depending on how your business is set up, the taxes you may have to pay are:

  • Income tax
  • Corporation tax
  • National insurance contributions
  • VAT
  • Employers' PAYE
  • Business rates

You can find out when and why you might have to pay each of these in our full guide to tax for small businesses

How do you find the tax process for online sellers? Let us know in the comments.

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We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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