With a rise in online shopping, there is a remarkable increase in e-commerce businesses. According to the Business Data Group report, the United Kingdom is witnessing a tremendous boom in the e-commerce start-up sector. Today, starting an e-commerce business is the best way to keep the overhead costs minimum and achieve a vast customer base. Like other businesses, an e-commerce business is also subjected to taxes. However, there is no need to pay tax whenever something is sold online, as the tax-free threshold is £1,000 for online sales. Also, there is no VAT tax if the annual turnover of the e-commerce business is less than £85,000, but there exists a 2% Digital Services Tax. If you are also an entrepreneur running an e-commerce business in the UK, remember that you too need to pay some taxes at the year-end, but fortunately, because of tax deductions, you can save big!
Here are some tax-saving tips that may prove helpful to you.
• Use home as an office as many entrepreneurs have their start-ups from their home as an office. Thus, you can become eligible to claim the expenses involved in using a room or multiple rooms for your e-commerce business, like heating bills, light bills, water charges, mortgage interest, repairs (if any) and so on! You have to reasonably calculate the amount of each which applies to your e-commerce business.
• An e-commerce business can’t function without an internet connection and your internet bill is indeed tax deductible. However, if you have the same internet service provider for your business and your home and are using your home as an office, calculate reasonably to deduct the proportion attributable to your business.
• You must have a fully-functional website to run your e-commerce business. This implies that you need to bear some expenses for website hosting, domain registration, and so on that can be tax deductible! This also means that you can claim your costs for paying towards the technical management of your e-commerce website or any app purchase for your online business.
• Any cost incurred on your online business promotion is deductible, including Google Adwords, email marketing software, Facebook Ads, ad placements for publications (both digital and print), sponsored ad placements and sponsored content fee by social media influencers.
• ATM fees, deposit fees, overdraft fees, monthly service fees, credit card fees and the wire transfer fees associated with your business bank account and a credit card are tax deductible.
• There is a trend-setting gig culture across the world. Hiring a freelancer for designing a website or content writing will lead you to save some more money as the costs that go into hiring them are tax deductible in the UK.
• Running an e-commerce business means you also have to incur shipping costs, but these costs are tax deductible! This may encompass expenses towards postages, envelopes, packaging material, delivery charges, and so on.
Many e-commerce businesses in the UK find it tough to comprehend the cumbersome laws and end up paying more than they should have. So, if you think it is a headache to navigate your way, consult our experienced accountants and remain stress-free.