Tax Deductions For Ecommerce Businesses

Wednesday 5 January 2022

Written by Roy Butcher

Tax Deductions For Ecommerce Businesses

Tax Deductions For Ecommerce Businesses

If you are operating or looking to start up an eCommerce business, you'll want to know about the allowable cost deductions you can make against your hard-earned sales, for tax purposes. Below are some of the most general tax deductions, but always consult with a professional (like us) with regards to your specific business to make sure you’re not missing out:

Using your home as an office

If you spend most of your time at home working on your business, then you are allowed to claim a tax deduction for using a part of your home as a workspace. There are several ways you can do this. The first two require a little more thought, and I would suggest seeking further professional assistance because there is more to consider. You can either:

  • Claim the costs for converting a specific part of your home or building an outside office. 
  • Claim a business proportion of the total costs of running your home as a workspace. If you operate as a limited company, you could charge it rent

Or the simplest way...

  • Charge your business a fixed rate deduction of say £4 a week or £208 per year

Co-working space

If you run your business from a co-working space, the costs associated with the space may be eligible to be deducted as office costs. Like claiming the costs associated with traditional office space, you may be eligible to deduct the cost of rent, utilities, supplies, and any equipment that you use in the co-working space.

Mobile phone and internet

If you use a mobile phone for customer service, talking to suppliers, and any other business purposes, you can claim the cost for the portion of the bill that’s related to your eCommerce business. Alternatively, if you operate via a limited company structure, your company can pay for the cost of a mobile phone contract. Clearly, if you're operating an eCommerce business you can’t function without an internet connection. This means that your business’s internet bill is tax-deductible. 

Website infrastructure, plugins, apps, themes and software

You need an online store to run a successful eCommerce business. Therefore, the cost of hosting your website, registering a domain, and paying for technical management to keep your site running smoothly are all potentially tax deductible. Similarly, any apps used to track your competitors, or process your sales transactions (e.g. A2X, Xero) are also tax deductible.

Freelance contractor costs

If you hire a freelance contractor to design your website, write content, or take photos of your products, these costs are tax deductible. 

Packaging and other general office supplies

If you're carrying your own stock rather than a drop shipping model, you would of course require having your offices adequately stocked. So, supplies for packaging, shipping, and operating the online business are tax-deductible.

Delivery costs

Most costs you incur from shipping goods to customers are tax-deductible. These include expenses for postage, packing material, subscriptions for postage meters, envelopes, and delivery charges. 

Motor and travel expenses

If you use your own car to deliver packages, meet clients and suppliers or conduct other business activities, you can make a claim for business mileage, which starts at 45p for the first 10,000 miles.

Accommodation and subsistence costs

Where hotel costs, meals, etc are incurred because of a business trip (see above) they should be tax deductible. Please note, HMRC considers client entertaining not a tax-deductible expense. Sorry!

Business insurance, business interest and bank fees

Any premiums paid for non-health-related insurance, for example, business or public liability insurance will qualify for a tax deduction. If you use a credit card to pay for business expenses throughout the year or secure a small business loan, any interest paid is tax deductible. 

Professional services

And lastly, any accountancy and legal fees paid to help support and manage the financial and legal aspects of your business, are also tax deductible. 

If you have any inquiries about your eCommerce business, feel free to contact me at or click here!

To check out our other articles providing you with all the latest in the world of business & finance for eCommerce, please click here.

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