Introduction
Starting an ecommerce business is exciting, isn’t it? You’ve got your products lined up, your website’s looking slick, and you’re ready to start making sales.
But there’s something a lot of new business owners quietly shove to the back of the to-do list — tax compliance.
Setting yourself up properly from day one isn’t just about avoiding HMRC headaches (although that’s a big part of it). It also helps you run a smarter, stronger business that can grow without hidden problems lurking in the background.
Here’s a simple, no-nonsense guide to getting your ecommerce business tax-ready — the right way.
What Is the Best Legal Structure for Your Ecommerce Business?
Before you sell a single thing, you’ll need to decide what type of business you’re running.
In the UK, most ecommerce sellers go for one of these:
Sole Trader:
Quick, easy, and cheap to set up. You’ll keep all your profits (after tax), but you’re personally liable if anything goes wrong.
Limited Company:
A bit more paperwork, but it separates you from the business. You could pay less tax overall if your profits are decent — and you’ll look more professional to suppliers and investors.
Partnership (less common):
If you’re setting up with a business partner.
⚡ Quick Tip: If you’re serious about scaling your store beyond a side hustle, it’s worth considering a limited company from early on. Not sure? Chat with an accountant who knows ecommerce businesses — like us at Centralyze Accounting.
How to Register Your Ecommerce Business in the UK
Once you’ve decided on your structure, you need to make it official.
Sole traders: You’ll register for Self Assessment with HMRC.
Limited companies: You’ll need to incorporate your business at Companies House and register for Corporation Tax.
It sounds daunting, but honestly, the paperwork is pretty straightforward if you know what you’re doing — and it’s better to get it sorted early, before you get busy with customers.
When Do You Need to Register for VAT in the UK?
This one catches a lot of online sellers out.
Right now (2025), you must register for VAT if your turnover goes over £90,000 in any 12-month period.
Even if you’re not there yet, it might be worth registering voluntarily:
You can reclaim VAT on business expenses
You’ll look more credible, especially if you’re dealing with other businesses
It gets you in the habit of proper record-keeping
Just remember: once you’re VAT registered, you’ll need to add VAT to your prices and send regular VAT returns to HMRC.
Need help deciding whether voluntary VAT registration makes sense? A specialist in ecommerce accounting services can walk you through it.
Why Good Bookkeeping is Essential for Ecommerce Tax Compliance
Don’t leave this until “later”. Trust me — your future self will thank you.
Good bookkeeping means:
Recording every sale and every expense
Keeping copies of receipts, invoices, and bank statements
Using cloud-based accounting software (like Xero or QuickBooks) that integrates with your website or sales platforms
It’s so much easier to stay on top of your numbers if you build good habits right from the start.
Even better? Having an accountant set everything up properly with Making Tax Digital (MTD) compliance in mind — so you’re future-proofed as HMRC moves more stuff online.
Should You Open a Business Bank Account for Your Ecommerce Store?
If you’re a sole trader, you’re allowed to use your personal account — but honestly, it’s not a great idea.
Mixing business and personal transactions just makes tax time a complete nightmare.
Having a separate business account helps you:
Keep clean, tidy records
Make bookkeeping (and claiming expenses) way easier
Look more professional to suppliers and payment processors
Some banks even offer special perks for start-ups — worth shopping around.
Planning Ahead for Your Ecommerce Tax Bills
Here’s a mistake almost every new business owner makes at least once:
They spend all the money they make, forgetting that a chunk of it doesn’t belong to them. It belongs to HMRC.
Avoid the panic by:
Setting aside 20%–30% of your income in a separate savings account
Keeping an eye on your expected tax liabilities every month
Considering “Payments on Account” if you’re a sole trader (your first year can be confusing otherwise!)
Being organised now saves a lot of stress — and last-minute scrambles — later on.
Why Ecommerce Businesses Should Work with a Specialist Accountant
Honestly, you don’t need an accountant for everything — but if you’re serious about building a proper ecommerce business, it’s smart to have expert backup.
A good accountant will:
Help you structure your business tax-efficiently
Make sure your VAT, Self Assessment, and Corporation Tax are all handled
Keep you updated on changing tax rules (especially post-Brexit for online sellers)
Spot savings and deductions you might miss doing it alone
At Centralyze Accounting, we specialise in helping ecommerce businesses get set up for long-term success — not just filing forms, but giving real advice that helps you grow.
Final Thoughts on Ecommerce Business Tax Compliance in the UK
Setting up your ecommerce business properly for tax compliance isn’t the most glamorous part of starting a brand — but it’s one of the most important.
Get it right now, and you’ll save yourself mountains of hassle later.
Get it wrong… and you might find yourself fighting fires when you should be scaling your business.
If you’re ready to get everything sorted the smart way, book a free consultation with Centralyze Accounting today.
Let’s make sure your ecommerce business is built on rock-solid foundations — not crossed fingers.
Quick Checklist for Ecommerce Tax Compliance
✅ Choose your legal structure (sole trader, limited company, or partnership)
✅ Register with HMRC and Companies House (if applicable)
✅ Understand when and how to register for VAT
✅ Set up cloud-based bookkeeping from the start
✅ Open a dedicated business bank account
✅ Put money aside for tax bills (20–30% of income)
✅ Consult with an ecommerce accountant early