Advice about business please
Discussion
Greetings
I need some advice... recently I have had a lot of interest in crafts, turns out I have a knack, I want to explore this to see where it takes me, with a view to making a bit of money out of it. I work full time, so this has to be started with a view to being part time.
First off, I would like to start an Ebay Shop, making these products, see what the market is and go from there, and if successful... my own website and advertising.
However I was wondering ...
How far you can go in a 'business' before tax is an issue, Selling stuff in an ebay shop is OK is it?
I presume businesses have to 'register' Whats the proceedure and timescales?
Can you please advise me like I know nothing, as I dont.
(I know how to budget, costs/sales, profits and anything that involves the money side of things)
Many thanks
I need some advice... recently I have had a lot of interest in crafts, turns out I have a knack, I want to explore this to see where it takes me, with a view to making a bit of money out of it. I work full time, so this has to be started with a view to being part time.
First off, I would like to start an Ebay Shop, making these products, see what the market is and go from there, and if successful... my own website and advertising.
However I was wondering ...
How far you can go in a 'business' before tax is an issue, Selling stuff in an ebay shop is OK is it?
I presume businesses have to 'register' Whats the proceedure and timescales?
Can you please advise me like I know nothing, as I dont.
(I know how to budget, costs/sales, profits and anything that involves the money side of things)
Many thanks
Selling items with a view to making a profit constitutes a "business" and once you have commenced doing this, you are obliged to notify HM Revenue and Customs. It doesn't matter what methods you use to make your sales - running a shop, mail order, working from home, car-boot sales or e-bay - it's all business. Whether you make a profit at this activity is nor relevant - merely trading (even with a loss) is sufficient to warrant notifying the Revenue.
In reality, the Revenue are not that bothered if you are making a loss at what you do - and, indeed, may even challange that you needed ro notify them you were trading if you only ever make losses. They might try to argue that, if your "business" only ever makes losses, that it is, in fact, a "hobby" and not a proper "trading activity". They sometime adopt this approach to stop individuals offsetting trading losses incurred in the tax year against other income and thereby reducing their overall tax liabilities. In many cases, taxpayers can obtain tax refunds by offsetting such losses.
However, if the activity is profitable, then they are insistent that you register as a "Self Employed" individual. You have three months to do this from your date of commencement of trading. Failure to do so will result in an automatic fine of £100.
Once you are registered with the Revenue, you will be expected tp pay the Self Employed National Insurance Contributions (Class 1) although you can claim exemption from this if your Self Employed profits are less than £5,000 approximately.
And, of course, after 5 April you will be issued with a Self Assessment Tax Return for completion.
In reality, the Revenue are not that bothered if you are making a loss at what you do - and, indeed, may even challange that you needed ro notify them you were trading if you only ever make losses. They might try to argue that, if your "business" only ever makes losses, that it is, in fact, a "hobby" and not a proper "trading activity". They sometime adopt this approach to stop individuals offsetting trading losses incurred in the tax year against other income and thereby reducing their overall tax liabilities. In many cases, taxpayers can obtain tax refunds by offsetting such losses.
However, if the activity is profitable, then they are insistent that you register as a "Self Employed" individual. You have three months to do this from your date of commencement of trading. Failure to do so will result in an automatic fine of £100.
Once you are registered with the Revenue, you will be expected tp pay the Self Employed National Insurance Contributions (Class 1) although you can claim exemption from this if your Self Employed profits are less than £5,000 approximately.
And, of course, after 5 April you will be issued with a Self Assessment Tax Return for completion.
Thanks Eric.
I am going to fire away with a couple more Qs, hoping you are still reading, I've done a few searches for info but have no luck about running a home business alongside a FT job.
Having a full time job means this will be run in personal time, so tax on income I presume is the standard 25%, or whatever it is nowadays.
Does the tax work only on income or on other things too regarding the 'business' ?
How does one go about sourcing materials that don't cost the earth, eg. cash and carry style stationers to keep my costs down.
TIA
I am going to fire away with a couple more Qs, hoping you are still reading, I've done a few searches for info but have no luck about running a home business alongside a FT job.
Having a full time job means this will be run in personal time, so tax on income I presume is the standard 25%, or whatever it is nowadays.
Does the tax work only on income or on other things too regarding the 'business' ?
How does one go about sourcing materials that don't cost the earth, eg. cash and carry style stationers to keep my costs down.
TIA
granola said:
Thanks Eric.
I am going to fire away with a couple more Qs, hoping you are still reading, I've done a few searches for info but have no luck about running a home business alongside a FT job.
Having a full time job means this will be run in personal time, so tax on income I presume is the standard 25%, or whatever it is nowadays.
Does the tax work only on income or on other things too regarding the 'business' ?
How does one go about sourcing materials that don't cost the earth, eg. cash and carry style stationers to keep my costs down.
TIA
I am going to fire away with a couple more Qs, hoping you are still reading, I've done a few searches for info but have no luck about running a home business alongside a FT job.
Having a full time job means this will be run in personal time, so tax on income I presume is the standard 25%, or whatever it is nowadays.
Does the tax work only on income or on other things too regarding the 'business' ?
How does one go about sourcing materials that don't cost the earth, eg. cash and carry style stationers to keep my costs down.
TIA
I am no accountant but your tax rate on your additional income will be charged at the same rate you are currently paying. IE if you are in the higher tax band at 40% you will pay 40% on that additional income. Income is Income
You pay tax on the business PROFITS (not the whole income). In other words, you can offset against your business income, business expenses. These expenses include apportionament of some home related costs (if running the business from home).
Purchases of larger items, such as vehicles or equipment, cannot be deducted directly against the business income. Instead, a percentage of the cost (known as a Capital Allowance) can be claimed.
The amount of tax you pay is arrived at by combining your taxable business profits with your income from salaries and other income such as dividends or bank interest receeived. Depending on what your total income for the tax year comes to, you will pay some tax at 10%, some at 22% and, if earning sufficiently high amounts, some tax at 40%. Obviously, if you have a PAYE job, that tax is collected at source by your employer and you do not have to worry about paying it yourself. However, any tax from the business and any aditional tax due at the higher 40% rate will be payable directly to the tax man under the Self Assessment system.
Purchases of larger items, such as vehicles or equipment, cannot be deducted directly against the business income. Instead, a percentage of the cost (known as a Capital Allowance) can be claimed.
The amount of tax you pay is arrived at by combining your taxable business profits with your income from salaries and other income such as dividends or bank interest receeived. Depending on what your total income for the tax year comes to, you will pay some tax at 10%, some at 22% and, if earning sufficiently high amounts, some tax at 40%. Obviously, if you have a PAYE job, that tax is collected at source by your employer and you do not have to worry about paying it yourself. However, any tax from the business and any aditional tax due at the higher 40% rate will be payable directly to the tax man under the Self Assessment system.
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