Tax advice for new business

[Messer]

Hi all,

I am in full time employment currently but am in the process of setting up an online shop selling RC helicopters and buggies.

Question is about paying tax on my sales, having no experience in paying tax for myself (have always been on PAYE), do I calculate the profit in each sale and pay tax on it? If i pay 40% on my full time job earnings, does this mean I will also pay 40% on all profit from my shop?

As I import my products, I have to pay VAT and import duty on the cost of the item. Do I work out the landed cost of the goods (including taxes and shipping) and then deduct that from my total sale price to calculate my profit and work out tax from there?

Sorry if these are really stupid questions but I have not been on a course yet to work out tax and accounting.

Any help/advice/pointers would be fantastic at this stage!

Thanks

[Eric Mc]

You have, in effect, started up a separate self-employed trading activity.

The procedure you need to follow is this:

i) notify HM Revenue and Customs within three months of commencement of trading. You can do this by phone - you'll find the number to call in your phone book.

ii) the Revenue will want to make you start paying the special self-employed National Insurance contribution (Class 2). Although this is very low £2.20 per week), if your self employed earnings are going to be below the NI limits (currently £5,200 per annum) you can apply to NOT pay the Class 2 NI.

iii) once you start trading and after contacting the Revenue, there is nothing else you need to do in respect of taxation until the Self Assessment tax return drops on your doormat. This will arrive soon after the end of the tax year. If you started business today, this means you would need to complete a 2007/08 self assessment tax return. You would receive that for completion in mid April 2008. The due date for submitting this return is either 31 October 2008 if completing on paper or 31 January 2009 if submitting electronically.

iv)in the meantime, you need to ensure you keep all the details of the business transactions from the date of commencement up to your financial year end (FYE). You are allowed to chose ANY date for the end of your financial year. Howver, for convenience, many small businesses chose 31 March as this FYE date as it is closest to the end of the tax year although you can stick with 5 April (the tax year end) if you want to.