“In the Know: Online Businesses and Paying Income Tax”

Particularly due to the current challenges the world has had to face due to the coronavirus pandemic, online selling has become more popular than ever. Lockdown has meant people have been stuck at home and has unfortunately caused many to lose their jobs. However, there seems to have been an influx of people using their own initiative and motivating themselves to take a hold of their passions and start selling products online, from the safety and comfort of their own home.

As an online seller, there seems to be a slight ‘grey area’ when it comes to paying taxes. This relates to the level of income you’re making from online sales. For many people, paying income tax is something they will disregard due to the fact they simply aren’t earning enough money from their profits, and they are perfectly right. Due to this reason HMRC implemented a tax-exempt trading allowance of up to £1,000; ultimately determining your filing status through business intentions and the earnings you make from it.

For most online sellers, particularly those who may have started a small business from home, selling items at small prices andstaying within HMRC’s allocated allowance isn’t a difficult task. And, in this case, the daunting and intimidating income tax doesn’t even need to be given a second thought. It will only become a problem for those who begin earning additional income over £1,000. In this case you will be expected to declare it and consequently pay taxes. There is no need to worry if this is you though, as the whole team at AA&T are on hand to help. We specialise in Taxation and can take care of self-assessment tax returns, ensuring the whole process is as straightforward as it can be.

We can complete any forms and help you with any details which may be confusing for you. The self-assessment tax return will place you in the necessary tax bracket and ultimately determine your personal Income Tax. By clearly identifying your income on your tax return, the tax from your internet sales should be automatically applied.

Whether you are currently entitled to pay income tax or not, you never know what the future may hold. This is why we encourage everyone who is selling online to keep a record of everything. If needed, keeping records is essential when being fully compliant with HMRC. You may be required to provide evidence of invoices, receipts and bank statements so we advise these are all filed appropriately. Additionally, it also provides you with the relevant information you will need in order to double check and input correct figures on any future tax forms.

If you feel you may need any help at all in regards to paying income tax, or feel you may need to be paying it when you currently aren’t, please don’t hesitate to get in touch with our Essex accountants. We are here to help and make your life as easy as we can, alleviating any tax stress you may be experiencing.