Budget 2025: Examining the Challenges Ahead for UK Ecommerce

Posted by Amit Gupta on December 25th, 2024

When you're beginning to grow your online business and move into international markets, it's very important to ally with partners who have specific expertise, like reliableecommerce accountants.

But before you hand over logistics and accounting tasks to professionals, it's good to have a solid understanding of the basics so that you can manage your business better. Here's a closer look at how tax rules and regulations in the UK work for online stores that are either operating within or planning to expand into the UK.

Corporate tax

If your business is based in the UK, you need to pay corporation tax on the income you earn both domestically and internationally. The tax rate is 25% for larger businesses with profits above £250,000. However, smaller businesses with profits of up to £50,000 can continue enjoying a lower rate of 19%. For businesses that fall in between these thresholds, a tapered rate is applied.

Value-added tax (VAT)

There are three main VAT rates:

•          the standard rate of 20%, which applies to most items
•          a reduced rate of 5% that covers things like certain health products and children's car seats
•          and a zero rate for items such as food, books, and children's clothing.

Income tax

Income tax in the UK is calculated on a yearly basis, and the amount you pay depends on how much you earn. Note: Starting from April 2023, the threshold for the higher rate band dropped to £125,140, and the threshold for the additional rate band decreased to £125,141.

National Insurance (NI)

As a self-employed ecommerce business owner in the UK, you'll likely need to pay National Insurance (NI) to contribute to the UK's social security system, which provides benefits like the State Pension. This is a tax on your self-employed profits.

You'll typically pay two types of NI:

Class 2 NI: This is a flat rate weekly contribution. You usually only need to pay this if your profits are above a certain threshold.

Class 4 NI: This is a percentage of your profits above a certain threshold.

You'll need to pay NI through Self Assessment. This is usually done annually, and you'll declare your profits and calculate your NI liability.

The exact amount you'll pay depends on your profits. Note that NI rates and thresholds can change, so check the latest information from HMRC.

These are just some of the main types of taxes that businesses need to be aware of when operating in the UK. For more detailed information, consult with the reliableecommerce accountants from Allenby Accountants who can provide expert guidance and support to ensure your business is compliant with all tax laws and regulations.

About the Company:

Amit Gupta, Director, Allenby Accountants.

Allenby Accountants is an independent accounting firm in Uxbridge, the western part of London. Our team delivers comprehensive financial services and expert advice to help you achieve your business objectives. We support a wide range of small and medium-sized enterprises across London, empowering them to maximise wealth and minimise costs. Our offerings include bookkeeping, accounting, VAT management, tax planning and compliance, succession planning, inheritance tax, capital gains tax, and more. We specialise in sectors such as professional services, retail, healthcare, property and construction, and non-profit organisations.