Budget 2016: Time to celebrate for online sellers?

Currencies Direct March 18th 2016 - 2 minute read

George Osborne’s 2016 Budget outwardly championed the UK’s “micro-entrepreneurs”, including the thousands of online sellers using marketplaces like Amazon and eBay to trade. However, there are those that are sceptical of Osborne’s offering to small businesses and view the tax reforms as token gestures aimed at winning voter support ahead of the EU referendum in June. So, what has the budget really delivered?

Online sellers have been directly affected by the budget in two key areas:

  1. Businesses selling online will no longer have to pay any tax on the first £1,000 that they earn, and the small business relief rate will rise to £15,000.

Styled as ‘the tax break for the digital age’ the government wish to recognise the value that small ecommerce businesses bring to the economy. This will no doubt be especially poignant for sellers at the early stages of building their business, who will not be required to produce any paperwork for earnings under the £1,000 threshold.  The government believes that in total over 600,000 small businesses will benefit from reduced business rates and savings will average £6,000 a year, freeing up finances that can be quickly invested in new inventory or expanding into new markets.

  1.  The government have pledged to take action against tax avoidance and close corporate tax loopholes.

This is perhaps the most interesting point to come out of the budget for online sellers. Non-EU sellers who are storing and selling their goods in the UK without paying VAT have been given an unfair diadvantage over domestic sellers by undercutting them on price in the marketplace and cashing in on sales.

The new strategy gives tax inspectors increased powers to investigate overseas sellers and ultimately puts more onus on marketplaces themselves to ensure that fair competition is observed. Amazon and eBay could find themselves in the firing line if they fail to take responsibility for their third-party sellers, and it will be interesting to see how they respond to these requirements in the coming months.

Despite insistence that the UK is enjoying a solid and steady period of growth, the forecast for productivity and growth in the UK has actually been downgraded.  Osborne was also quick to point to the fears that the outlook for the global economy is far from rosy, with turbulent financial markets making for “a dangerous cocktail of risk”. 2016 holds a lot of promise for online sellers but it appears to be set against a strained economic environment.

With uncertainty surrounding events like the EU referendum – financial markets are likely to be volatile and small businesses will feel the effects throughout the rest of the year. As the price of Sterling hangs in the balance so does the ability of UK online sellers to effectively source and competitively price their products in a global market.

Sterling has weakened substantially this year and this has placed UK online sellers in a vulnerable position compared to their European counterparts when it comes to sourcing stock from China and selling to the European and US market. The 2016 Budget should certainly go some way to restoring the balance. 


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