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Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK

Sep 19, 2022 | Tax & Accounting

The number of Ecommerce seller based in the UK grew ever since the pandemic hit. If you are one of those who just started their venture, continue reading this blog to know more about the expenses you should claim from your taxes.

Ecommerce Seller Tax UK: Top 10 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK

The COVID-19 epidemic has hugely impacted consumer and company purchasing habits, with many people increasingly turning to internet sellers for goods and services. At Sterlinx Global, we help e-commerce firms navigate an ever-changing tax landscape, and demands from HMRC.

While e-commerce development is wonderful news for these marketplaces and online merchants, it also means they must be aware of their indirect tax duties. However, complying with various norms and regulations is easier said than done.

What are your dues as an Ecommerce seller based in the UK? 

It is critical to ensure that you deduct the correct amount of expenses from your tax payments to avoid non-compliance and the possibility of facing steep fines.

Ecommerce Seller Based in the UK
Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK 5

1. Using your home as an office

If you spend a great deal of time working from home, you can claim some of the costs associated with renting and heating your home from your tax bill.

  • Claim the costs involved with converting your home into an office. 
  • Claim a portion of the bills involved in running your home
  • Charge your business a fixed rate of £4 a week or £208 per year

2. Co-working space

If you use a co-working space for your business, the costs associated with renting such a space can be deducted from your tax bill. These are similar to costs related to renting space for your business. You are equally allowed to deduct the cost of rent, supplies, utilities, and equipment used in the co-working space. 

3. Mobile phone and Internet

If your mobile phone is used for customer service or care, engaging with suppliers or business partners, you can deduct a portion of your phone bill or internet billing as this is related to your e-commerce business. However, if you operate as a limited liability company, you can claim the costs of the mobile phone. 

No e-commerce business can function without the internet. As such, internet-related costs are tax-deductible. If you share your internet with the rest of the household, this is equally tax-deductible. 

ra 50 Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK
Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK 6

4. Website infrastructure, plugins, apps, themes, and software

To run a successful e-commerce company, you need a good online store. As such, the costs associated with hosting your website, registering your domain name, and other technical aspects related to branding and management can be deducted from your final tax bill. 

Furthermore, you can claim VAT on a WordPress plugin bought to upgrade your website. Finally, any apps that are used to track your sales or competitions can equally be deducted as they are used by your business. 

5. Freelance contractor costs

If you hired a freelance contractor to work on your website or take photos, all such costs are tax-deductible as they are needed to produce your final product or service. However, bear in mind that you are not allowed to continually deduct such expenses or employ full-time employees as contractors. 

6. Office supplies and packaging

If you purchase office supplies that are useful in packaging or shipping, these can be deducted from your final VAT tax bill. These are important components of e-commerce businesses and therefore are viewed as costs by HMRC. You can thus deduct expenses for items such as boxes, tape, ink, and other office supplies. 

ra 51 Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK
Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK 7

7. Costs of delivery 

A majority of costs incurred during shipping can be deducted from your final tax bill. These include things such as postage and stamps, packaging material, envelopes, and other charges imposed during delivery. This is an essential cost for e-commerce sellers as they have to supply goods to consumers and buyers regularly, therefore must properly account for it. 

8. Travel Expenses

If you use your car to deliver packages and goods and even meet suppliers to attend business-related events, you have two options regarding how you treat VAT returns. 

If you use your car to deliver packages or engage with clients at meetings and events, there are two options available to you when it comes to travel expenses. 

  • You are allowed to claim some mileage allowance for running costs. Currently, this is estimated at 45p per mile, but only for the first 10,000 miles. 
  • You can claim a portion of the running costs if you operate as a sole trader. 

9. Accommodation and subsistence costs

Where hotel costs and meals are part of a business trip, they should be deducted from the final tax bill. However, HMRC considers client entertainment as an expense that is not tax-deductible. 

ra 52 Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK
Top 11 Expenses You Should Claim From Your Tax as an Ecommerce Seller Based in the UK 8

10. Business insurance, business interest, and bank fees

Any premiums that are paid for business insurance or public liability insurance qualify for tax deductions. Using a credit card to pay for such business expenses through a loan is tax-deductible. 

11. Professional services

Professional services such as accountancy and legal fees used to manage aspects of your e-commerce business are tax-deductible. These are significant costs for e-commerce sellers, and while you may not always require legal services, you can deduct them from your VAT bill. Memberships in professional organisations can equally be deducted from your VAT tax bill.

Here is a list of recently asked questions about the top 10 expenses you should claim from your tax as an e-commerce seller based in the UK

  • Can I deduct costs for mileage allowance?

    You can obtain a tax-deductible allowance from any mileage allowance paid out. You can pay yourself a mileage allowance if you operate as a business and use your car to run business-related errands, deliver products or attend meetings. 

  • How do you register for VAT?

    You can register for VAT by registering online on the HMRC website. Upon registering, you get a VAT number which can be accessed in your government gateway account. 

  • What is the trading allowance?

    There is a £1,000 tax-free “trading allowance” for individuals who do not earn enough to pay HMRC any tax whatsoever. As such, you do not need to worry about VAT tax returns at this point.  

Conclusion

As an e-commerce business, you may be reeling from the COVID-19 pandemic and wondering how you can save on costs. Rather than overpay tax, it is preferable to better understand what you can deduct from your HMRC VAT bill. 

The e-commerce seller tax is not easy to navigate and may be time-consuming. Why not speak to one of our experts and only focus on how you can save on taxes. Sterlinx Global can help you better understand the e-commerce seller tax.

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