With Christmas behind us, it’s time to get your personal tax return in, if it’s still outstanding. If you’re wondering how to file a personal tax return online specifically as an e-commerce entrepreneur, check out these handy tips.
Whether you run your e-commerce business as a sole trader or as a limited company, you must declare your profits (or loss) when you submit your personal tax return. If you are at all unsure on how to do so, please get in touch for guidance.
You need to submit a personal tax return if:
- You earned more than £1,000 as a sole trader or partner
- You earned money from renting out a property outside of your business
- You earned commission
- You earned income from savings, investments, and dividends
- You earned foreign income, such as international sales
The first and last options are most likely to be applicable in your case. You do not need to submit a personal tax return if your e-commerce store is a limited company and you only received wages, but it is required if you have received dividends. If you don’t need to submit, you can still choose to do so as there are potential tax advantages.
What you will need to submit your personal tax return:
- Your Unique Taxpayer Reference number (UTR)*
- Your Government Gateway ID*
- Your National Insurance number
- Details of your income for the tax year from all sources
- Records of any expenses relating to your e-commerce store if you are a sole trader or partner
- Any contributions to charity or pensions which might be eligible for tax relief
- P60 or other records showing how much income you received which you’ve already paid tax on if your e-commerce store is a limited company.
*N.B. Registering and receiving your UTR and Government Gateway ID can take up to 20 working days so if you don’t have them, act now, and let HMRC know if your return is likely to be late to try and avoid a penalty charge.
File personal tax return as an e-commerce entrepreneur
The most important thing to remember when you file personal tax returns is that accuracy and promptness are essential. Even if you have no tax to pay, delaying your submission past the due date can incur penalty fees. Inputting incorrect data will also lead to penalties, so if any figures are not finalised, make sure to tick the relevant box to confirm this.
Make sure to tick that you have received self-employment income if a sole trader or partner, as this will add in the relevant pages for you to enter your earnings and expenses incurred through your e-commerce store.
If your e-commerce business is a limited company, declare your wages through a limited company and enter the full sum of dividends you have received in the year.
You will also be asked for your bank interest figure, which should be available through your online banking portal for your personal account, or through your accounting software if you use a dedicated business account (our recommendation).
The process is very straight forward. Tick the relevant options as prompted and the system will automatically populate your return with the correct pages for you to fill out. Once on the completion page, you will be asked if you used any estimated figures. You will also be asked if you would like to attach any supporting evidence. If your e-commerce business is in its infancy, it is unlikely you will need to add anything. But if you are using estimated figures or have had a substantially better or worse year of trading, you can attach the relevant pages of your accounts to back up your data, limiting the risk of an audit.
If you are filing a personal tax return online, it must be completed by 31st January the year after the tax year ends. For example, it is 31st January 2021 for the 19/20 tax year. Accounting for income from international sales can be a stress for many, but with us by your side, it will be something else ticked off the list. Get in touch with our team of experts and say goodbye to e-commerce-related tax headaches.
The best time to act is now.