The tax bands and thresholds for the 24/25 tax year could influence how you choose to pay yourself as an e-commerce entrepreneur. It may be more tax-efficient to pay yourself dividends as a director. We’re also looking at predictions for the 25/26 tax year so you can plan ahead.
The 24/25 tax year has been filled with the confusion and drama of the previous tax year. Between COVID, Brexit, and the cost of living crisis, you can be forgiven for not being as on the ball with the current tax bands and thresholds! Don’t worry – we’ll get you up to speed for this tax year and take a look at what experts are predicting for next year.
Tax bands and thresholds 24/25
Tax bands and thresholds can have a major effect on our personal and business finances. If your business is limited, you will need to consider Corporation Tax. If you are VAT registered, a likely scenario if you import or export outside of the UK, you will need to consider the VAT rate in every country you deal with.
Regardless of your e-commerce business’ entity choice, you will need to know the current Income tax and National Insurance rates. And if you are a director, the dividend rate may be a convenient way to optimise your tax situation.
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Income tax
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,139 | 40% |
| Additional rate | £125,140+ | 45% |
2025/26 predictions: The tax bands and thresholds are currently projected to remain in effect until 2028.
National Insurance
National Insurance is set at a different rate depending on whether you are an employee or self-employed. If you are both, as many e-commerce entrepreneurs are while their businesses are ramping up, your employment will cover your National Insurance contributions provided you are over the threshold. The below figures are purely for self-employment.
| Small profits threshold | £6,725 | 0% |
| Class 2 NIC | £6,725+ | £3.45 per week |
| Class 4 NIC | £12,570 – £50,270 | 9% of profits |
| Upper profits limit | £50,270+ | 2% of profits |
Unlike most forms of taxation, most taxpayers will need to pay both Class 2 and Class 4 contributions.
If you are unsure of the correct level of taxes for you to pay due to multiple income streams, please ask an accountant before submitting your annual figures.
2025/26 predictions: Recently, the government cut the main rate of national insurance contributions paid by employees from 12% to 10%. It is expected that the current rate of National Insurance will remain in step with income tax next year.
Dividend rate
Dividends are usually the most efficient way to pay yourself if you are a director of a limited e-commerce company. The rates are far more favourable than personal tax bands.
| Dividend allowance | £1,000 | 0% |
| Ordinary rate | Amounts over personal allowance up to £50,270 | 8.75% |
| Higher rate | Amounts over personal allowance of £50,270 to £125,140 | 33.75% |
| Additional rate | Amounts over personal allowance of £125,140+ | 39.35% |
2025/26 predictions: It is yet to be announced, but it is likely to remain in step with income tax thresholds and therefore not change.
Corporation Tax
The main rate of corporation tax is 25%.
2025/26 predictions: Corporation tax is on the rise and is expected to reach £17.2 billion in 2025/26 compared to £11.9 billion in 2023/24.
VAT rates
Most e-commerce business owners will need to look at international VAT rates but, in the UK, the standard rate is 20%, with the reduced rate at 5%.
2025/26 predictions: VAT looks stable for the next 12 months.
Next Steps
If you need help organising your e-commerce business’ taxes in the most efficient way or are unsure of your international tax liabilities, get in touch with our team of specialists.
Why choose Unicorn Accounting?
Ensure you keep on top of your finances and tax obligations by outsourcing to an accountant. This means that you don’t need to worry about your end of year accounts, payroll, or bookkeeping requirements.
At Unicorn Accounting we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management, bookkeeping, cash flow statement, and tax filing services to support and scale your business.
Our team of accountants and Xero-certified advisors have experience working with both small start-ups and family-run online stores to large-scale, international retail and e-commerce brands.
If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience, and skills with innovative technologies. To see how we can help you maximise the scalability of your e-commerce brand all year round, get in touch with Unicorn Accounting today. Or click here to get a free quote.
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