If you sell online, the tax you pay depends on whether you trade as a sole trader or through a limited company, and on whether you have crossed the £90,000 VAT registration threshold. The calculator above compares the two structures for 2026/27 so you can see which leaves you with more after tax.
As a sole trader you pay Income Tax and Class 4 National Insurance on your profit. As a limited company you pay 19% Corporation Tax on profit, then tax on the salary and dividends you draw. The right choice depends on your profit level and how much you take out.
How is ecommerce tax calculated in 2026/27?
For a sole trader, profit above £12,570 is taxed at 20% to 45% Income Tax plus 6% and 2% Class 4 National Insurance. For a company, profit is taxed at 19% Corporation Tax up to £50,000 of profit (rising toward 25% above £250,000), then you pay dividend tax at 10.75%, 35.75% or 39.35% on drawings. The rates come from HMRC.
| Structure (2026/27) | Main taxes |
|---|---|
| Sole trader | Income Tax 20-45% plus Class 4 NI 6%/2% on profit |
| Limited company | 19% Corporation Tax plus dividend tax 10.75-39.35% on drawings |
When does an online seller have to register for VAT?
You must register for VAT once your taxable turnover passes £90,000 in any rolling 12-month period, or if you expect to pass it in the next 30 days. This is turnover, not profit, so ecommerce sellers can reach it quickly. Our ecommerce VAT registration guide explains the detail and the Flat Rate Scheme option.
Should I be a sole trader or a limited company?
As a rough guide, a limited company often becomes more tax-efficient once profits comfortably pass the point where you would pay higher-rate tax as a sole trader, because you control when you draw profit. It does add admin, filing and cost. Read sole trader vs limited company for ecommerce, and if you are unsure our VAT and accounting team can advise.
Related guides and calculators
- Sole trader vs limited company for ecommerce
- Ecommerce VAT registration guide
- Self-employed tax calculator
- Dividend tax calculator
Frequently asked questions
How much tax do ecommerce sellers pay in 2026/27?
It depends on your structure. A sole trader pays Income Tax at 20% to 45% plus Class 4 National Insurance at 6% and 2% on profit. A limited company pays 19% Corporation Tax on profit, then you pay dividend tax of 10.75% to 39.35% on what you draw.
When do I have to register for VAT as an online seller?
You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12-month period, or if you expect to pass £90,000 in the next 30 days. This is based on turnover, not profit.
Should I be a sole trader or a limited company?
A limited company often becomes more tax-efficient once profits comfortably exceed the higher-rate threshold, because you control when you draw profit. Below that, a sole trader is usually simpler and cheaper to run. The calculator compares both for your figures.
Do I pay tax on eBay, Etsy and Amazon sales?
Yes, you pay tax on the profit from online sales once it exceeds the £1,000 trading allowance. Marketplaces now report seller information to HMRC, so it is important to declare income through Self Assessment or a company return.
What expenses can ecommerce sellers claim?
You can claim costs incurred wholly for the business, including stock, marketplace and payment fees, shipping and packaging, software subscriptions, and a proportion of home and broadband costs where you work from home.