Last year, 1.8 million self-employed workers missed the deadline to pay their income tax. This was the highest number of failed returns that HMRC has ever seen.
Completing your self-assessment tax return on time is strongly advised so that you don't incur penalties. Therefore, it's important to know whether your business has an obligation to pay taxes and which ones are due.
Here, we'll tell you all you need to know about tax liabilities for online sellers and eCommerce stores from eBay to Amazon and Etsy.
Read on to find out more.
What Are Ecommerce Stores and Online Sellers?
HMRC understands an online marketplace to be a company that sells products via a website or platform online. Apps are also included here if the business uses them as a tool for sales.
Your business must meet the following terms to be considered an online marketplace, eCommerce store, or online seller:
- Contractual terms are set for the selling of goods to buyers
- Some level of authorization or action must be taken for payments to be made
- Actively orders or sells goods
If you meet these criteria, you'll be eligible to pay HMRC tax on your store.
How Do You Pay Taxes for Your Online Store?
To pay your taxes, you must complete an online self-assessment of your trading operations made throughout the previous tax year. This takes into account sales and expenses and needs paying by 31st January of the next year.
At The Numbersmith, we use digital accounting services to make filing your returns easier. Rather than having to number crunch yourself, we'll do it for you. That way, you can benefit from:
- Saving time
- Reducing stress
- Having greater confidence that your returns are completed correctly
VAT Tax Eligibility for Online Stores: eBay, Amazon, and Etsy
To be liable to pay VAT, your store must:
- Sell to overseas customers
- Receive VAT information from your selling platform or marketplace for these customers
- Sell your products from within the UK and exceed £85,000 in annual sales
If you're located in Northern Ireland, turnover £70,000 per year in sales to customers within the country, and hold products in the EU, you're liable to pay VAT.
You can pay VAT online by first registering your account. Alternatively, you can complete and send a VAT1 form by postal service.
Providing VAT to Your Online Marketplace
Once you're given your VAT number, you'll need to provide it to all of the online platforms you sell through. Following this, each marketplace will then present this information on their site.
Always remember to use the same business name you've set up your VAT account with on the gov.uk website. Otherwise, you could compromise your integrity with the platforms you use and they may subsequently bring your trading operations to a halt.
In order for you to sell, they must be able to confirm your business name with that which is displayed when they run your VAT number through a reliable checker online.
Sign Up With Us for Better Management of Your Ecommerce Accounts
Do you run an online store on eBay, Amazon, or Etsy? Are you in need of help managing your eCommerce accounts? It's time to get on board with the right digital accountants for you!
Join other online sellers that are taking advantage of our software, reducing the pressure that comes with keeping up with accounts. Call us today! We're ready to give your store the help it needs.