Tax return- a quick question

[Fozzmeister01]

Hi all,

I am a sole trader and this is my second year doing the tax return- quick question-

Do I need to add anything on my second year tax return about the first years stock I bought in which I still have some?

Or is it really as simple as I bought this much stock in the 2nd year minus expenses etc

 

[Scalloway]

What did you do with year end stock in last year's accounts?

 

[Fozzmeister01]

Hi,

Last year was my first year so that went into a stock column.
Do I disregard last years stock and only put this years stock bought in this years tax return?

Thanks
Marc

 

[Scalloway]

If you deducted the stock at the end of last year from the cost of goods sold you add it to the cost of goods sold this year. You deduct the stock on hand at the end of this financial year.

 

[Fozzmeister01]

That to a novice like me sounds very confusing.
Is it possible you could give me an example in numbers?

Thanks for your time
Marc

 

[Scalloway]

Say in your first year you spent £10,000 on goods in your first year and had £2,000 left in stock at the end of the financial year.

Purchases ...............£10,000
Less stock................. £2,000
Cost of goods sold ...£8,000

In your second year you spend £12,000 on goods in your first year and have £3,000 left in stock at the end of the financial year.

Opening stock...........£2,000
Purchases ...............£12,000
Less closing stock.... -£3,000
Cost of goods sold ...£11,000

 

[Fozzmeister01]

Ok I'm kind of getting it.

The cost of goods sold is just the figure from what I purchased it for. In your second year example I had £14000 of stock total and sold £11000 of it. So what if that £11000 of stock I sold for £20000. I would just be taxed on £9000? Is that right?

On my sole trader tax return I see nothing about a cost of goods sold, all I see is what my sales were and what my expenditure was. It seems so simple on the form (Sales - expenditure = taxable profit if there is one) until I hear about cost of sales and all the other terms lol.

 

[Scalloway]

To get your allowable expenses add your cost of goods sold to all your other business expenses.