Help with my Ebay Business Idea TAX

seanspurs

Hi all, wondered if you could help me.

Im currently thinking about the idea of setting up an ebay business account and to start selling items.

Now this would be a part-time thing as i already have a job. The thing im unsure about though is the tax and NI part.

Now i currently have a tax code of 647L and earn 24K from my first job. How by setting up this part time ebay business will this change?

Also how much extra Tax and NI will i have to pay? This at the minute is to just make an extra £100 - £250 a month so should take me over the next tax bracket. However im still unsure upon this matter. Your help would be extremely greatful.

Sean

Gertie_Walker

Your business will not affect the tax you pay on your salary. You will complete a self assessment every year and pay the tax due on your profits direct to HMRC.
Basic rate tax is 20% up to £4,700 of taxable income, then its 40%. You will be liable to class 2 NIC of £2.40 pw and class 4 NIC if your profits exceed £5035 (?) a year. All rates are on the HMRC website.

jennifernil

If you make £250 per month from this business, that is only £3000 per year. Added to your current £24k earnings, this will not take you into 40% tax.

I think Gertie meant £47k taxable takes you into 40% tax.

seanspurs

So say i make a profit of £3000 a year. Would i just pay a 20% tax on this self assessed? Therefore £600. Regarding NI, would i pay this also, or not as i am currently paying it in my full time job?

Gertie_Walker

£47k taxable is before tax free allowances.

Yes, you would pay 20% on the £3k. You would be exempt from class 2 under the small earnings exemption and would not be liable to class4 as the income is below the limit. The fact that you already pay class1 on your salary is irrelevent until you reach the upper earnings limit for class 1 which is around £40k-ish.

seanspurs

So i wouldnt have to pay any additional NI? What are the limits of these? Thanks for the help. Feeling much more confident about the processes.

jennifernil

http://www.hmrc.gov.uk/working/intro/selfemployed.htm

Info here. £5075 is mentioned.