Paying tax ebay business

[Mike183]

I am in the process of starting an ebay business, but im abit confused regarding tax. I have around 70k in stock (vehicle parts) that I have accumulated over the years. My question is I understand I only pay tax on my profits, but how would I work out and deduct the cost price of the item when its part of a joblot. Or am I missing something. (This is my first business so very new to this)

Any help much appriciated. Thanks in advance.

 

[DoolallyTap]

Get the items listed, start selling get the cash, worry about tax later

 

[Mike183]

Get the items listed, start selling get the cash, worry about tax later

Just want to make sure im prepared in advance so theres no suprises down the line

 

[Joyous]

I have around 70k in stock (vehicle parts) that I have accumulated over the years

Where did the 70k figure come from? Is that what you paid for it or what you expect to get for it?

 

[elaine@cheapaccounting]

You can introduce the stock to the business. You will need some documentation to support the value or cost that you attach to the items e.g. evidence of what you paid for it.

Preparing a list of what you have and a folder of supporting documentation would be a good approach.

In accounting terms stock is value at the lower of cost and net realisable value.

 

[John Martin]

As the previous poster said, if you want to set all that stock off against your income you'll need to have all the receipts, just in case HMRC want to see them. It's unlikely, but they may ask for them at some point in the future.

Secondly, if they were part of a job lot, the simplest way would be to just average out the cost on each receipt, so all items hold the same value regardless of the actual value. For example, if you have a receipt for £1000 and there are 100 items on that receipt, then you value each one at £10.

You can earn up to £1000 per year without needing to file accounts, but you will need to let HMRC know you are doing this. If you do this though, you can't claim any expenses.

On the other hand, if you intend to turn this into a business and earn more than £1000 a year, then just start selling. You have up to 3 months from starting in which to register your business with HMRC. Just remember to keep all your records from the start..

I used to be an ebay/Amazon seller myself, so I do have some experience in this, but it's probably best to talk to an accountant, as things are constantly changing.

 

[Mike183]

Where did the 70k figure come from? Is that what you paid for it or what you expect to get for it?

As the previous poster said, if you want to set all that stock off against your income you'll need to have all the receipts, just in case HMRC want to see them. It's unlikely, but they may ask for them at some point in the future.

Secondly, if they were part of a job lot, the simplest way would be to just average out the cost on each receipt, so all items hold the same value regardless of the actual value. For example, if you have a receipt for £1000 and there are 100 items on that receipt, then you value each one at £10.

You can earn up to £1000 per year without needing to file accounts, but you will need to let HMRC know you are doing this. If you do this though, you can't claim any expenses.

On the other hand, if you intend to turn this into a business and earn more than £1000 a year, then just start selling. You have up to 3 months from starting in which to register your business with HMRC. Just remember to keep all your records from the start..

I used to be an ebay/Amazon seller myself, so I do have some experience in this, but it's probably best to talk to an accountant, as things are constantly changing.

Thanks for the advise.

So basically iv acquired the items over the years as part of a hobby. Most items where bout with cash (auto jumbles, facebook etc) so I dont have reciepts or proof of value. What would be the best way to go about this ?

 

[John Martin]

Thanks for the advise.

So basically iv acquired the items over the years as part of a hobby. Most items where bout with cash (auto jumbles, facebook etc) so I dont have reciepts or proof of value. What would be the best way to go about this ?

If you bought some on facebook, do you have any electronic records which show the value? Perhaps bank or credit card statements, emails, screen shots, etc.

The ones bought with cash, unfortunately you are going to struggle with those. I'm guessing you probably can't even remember what you paid for some items, let alone have records.

You can still sell those items, but you just won't be able to claim the cost back on what you paid for them.

 

[Mike183]

If you bought some on facebook, do you have any electronic records which show the value? Perhaps bank or credit card statements, emails, screen shots, etc.

The ones bought with cash, unfortunately you are going to struggle with those. I'm guessing you probably can't even remember what you paid for some items, let alone have records.

You can still sell those items, but you just won't be able to claim the cost back on what you paid for them.

Yes, id say 10% I can prove the rest unfortunatly there is no record, and like you say I cant remember what I paid myself due to how long ago it was. Regarding those items would it be a case of listing them, once sold il pay tax on the sale amount minus postage cost and ebay fees ?

 

[UK Contractor Accountant]

once sold il pay tax on the sale amount minus postage cost and ebay fees ?

LESS THE £1K TRADING ALLOWANCE EACH YEAR MIGHT BE A BETTER OPTION

 

[Newchodge]

Thanks for the advise.

So basically iv acquired the items over the years as part of a hobby. Most items where bout with cash (auto jumbles, facebook etc) so I dont have reciepts or proof of value. What would be the best way to go about this ?

How have you valued the stock at £70K?

 

[elaine@cheapaccounting]

Without support for the cost price yes you’ll have to pay tax on sales less any other costs incurred that you have supporting evidence for.

Good luck with your business

 

[elaine@cheapaccounting]

LESS THE £1K TRADING ALLOWANCE EACH YEAR MIGHT BE A BETTER OPTION

Direct costs may exceed that perhaps eg postage packaging selling fees etc

Obviously depends on volume

Options are claim the trading allowance or claim costs - it’s one or the other not both

 

[Mike183]

Thanks for all the great help.

I have a much better understanding on what I need to do now.

So with regards to paying the tax I am right in thinking I just need to fill in a self assesment ?

 

[elaine@cheapaccounting]

Yes you will need to register as self employed with HMRC and complete an annual self assessment

 

[John Martin]

Yes, id say 10% I can prove the rest unfortunatly there is no record, and like you say I cant remember what I paid myself due to how long ago it was. Regarding those items would it be a case of listing them, once sold il pay tax on the sale amount minus postage cost and ebay fees ?

Yes, that's correct.

You can deduct any expense from your profits, so that would also include things like packing materials, printer ink & paper (if you print off labels). If you have a warehouse where your parts are stored, you can claim the expenses on that too.

You can also claim for equipment such as printers and laptops, but if you use any of these for personal use as well, you need to work out what percentage is used for business and what percentage is used for personal use. You can only claim the percentage amount used for business.

If you drive to the post office or drop off point to send your items you can also claim on your car. For me, the best way to do this was to claim the standard HMRC mileage rate, which in my case was I think 25p per mile. (HMRC have a webpage with all the details) You just need to keep a record of how many miles you use it for business. (If you use your car for your business, don't forget to change your insurance for business use as well).

 

[elaine@cheapaccounting]

This may help ......

Where to start
Start up & Newbie Sole Traders​

 

[MyAccountantOnline]

...but how would I work out and deduct the cost price of the item ....

The cost price of the stock sold is the market value of the stock on the day you start in business.

As a sole trader you and your business are the same person but its dealt with as if you sold it to your business.

So you need to prepare a list of all the stock you have which you intend to sell and record the market value on the day you start your business.

 

[Paul Kelly ICHYB]

LESS THE £1K TRADING ALLOWANCE EACH YEAR

As an expert, can you help me clarify this? I see lots of references to the £1k, but can't see where it says annually, so have assumed that when someone has traded over £1k, regardless of timescale, they should register as SE.

£1k annual makes total sense, however, I have not seen an explicit mention of it.

 

[MyAccountantOnline]

As an expert, can you help me clarify this? I see lots of references to the £1k, but can't see where it says annually, so have assumed that when someone has traded over £1k, regardless of timescale, they should register as SE.

£1k annual makes total sense, however, I have not seen an explicit mention of it.

It's on the HMRC website - it states

If your annual gross income from these is £1,000 or less, you do not need to tell HMRC, unless....

 

[Paul Kelly ICHYB]

I am sure it never specified 'annual' before, but many thanks for that pointer!

What isn't explicit (but you can refer to the first sentence) is:
You must tell HMRC if you have:

• gross trading income over £1,000

 

[MyAccountantOnline]

I am sure it never specified 'annual' before, but many thanks for that pointer!

You are every welcome

 

[MyAccountantOnline]

...

What isn't explicit (but you can refer to the first sentence) is:
You must tell HMRC if you have:

• gross trading income over £1,000

Not quite sure what you mean Paul?

I really dont normally defend HMRC but on this one not quite sure how else they could word it?

Tax-free allowances on property and trading income

Find out about annual tax-free allowances for property or trading income and if you qualify.

www.gov.uk

 

[Paul Kelly ICHYB]

My God, accountants defending HMRC - what will be next!!???

"gross 'annual' trading income over £1,000" would be how I would be specific.

 

[MyAccountantOnline]

My God, accountants defending HMRC - what will be next!!???

"gross 'annual' trading income over £1,000" would be how I would be specific.

I have truly sinned today...holding head in shame

Ahh right, yes I get what you mean the omission of the word annual in the second section.