Starting an Ebay business

MummyEm

Hi

I have successfully been selling on Ebay for quite a few years - only privately, clearing out our personal belongings etc. I am looking to start a business that I can run around my 2 young children and am wondering whether an Ebay business is the route to go down.

This is only something that I am at the early stages of thinking about. I am wondering what exactly the route would be to go down? I have a few questions whirling around my head so would be grateful for any input on the following-

-What tax implications I need to consider?
-How much I would need to be keeping to cover tax bills?
-Would I need to make NI contributions?
-Tax bills- do you pay them in advance / on completion of tax return?
-Accounting - what records would I need to keep?

Thanks in advance for your responses

Beanynut2

Hi MummyEm

The Tax Office (aka HMRC) put on a range of free training for people just starting out on their own to explain the rules on self employment Tax/NI Contributions/VAT registration etc - you can access information about these courses in the Business Link website: http://www.businesslink.gov.uk/bdotg/action/home I was made redundant in March and attended a few of these courses, they are very useful.

Good luck
Jill

MummyEm

Thanks Beanynut2.
I've now had a good read of the website sections concerning starting a business / tax etc. very helpful. I will also look up the courses as suggested, I just got a bit engrossed reading it all!

I would be setting up as a sole trader.
So I would need to register with HMRC as self employed, make Class 2 NI contributions, keep money to one side for Class 4 NI in case I go over the threshold, and pay Income Tax via Self Assessment. I am missing anything else that's glaringly obvious? I don't want to end up with an enormous tax bill that I haven't thought of!

thanks x

InsideInsurance

You are looking at the right things from a tax perspective. As a rough rule of thumb you'd keep a third of your profit a side to cover your liabilities unless your going to be making it into the higher rate tax bracket.

The other elements to consider are things like:

Insurance - as a sole trader you and your business are legally one and the same so if someone was injured by something you had sold them then they would pursue personally for compensation. Likewise your home insurance may not cover you for storing your products or your computer etc as these become business assets but you'd need to check.

Using home as business - there can be contractual issues with using your home as a business in terms of rent agreements, covenants, mortgages etc which you would need to check. Likewise with council tax.

seoinkent

Have you become VAT registered so you can calim back the VAT on your business equipment such as office equipment computer etc Well worth doing, you can even claim some money back for fuel such as gas and electric.

InsideInsurance

As well as being able to claim back VAT you also have to charge all your customers and extra 20% though (unless what you are selling is 0% rated).

If you are selling B2B or 0% rated then the above is true. If you are selling 20% rated items to customers then the above certainly shouldnt be true as you'd hope income exceeds costs and so it would be better to pay the VAT on your costs and keep the extra 20% income in your pocket.

olias

I think you are just confusing things with VAT. VAT is only relevant if you are exceeding about £70000 a year turnover, which I doubt the OP is likely to do.

Olias

double_mummy

i would deffo go and take a book keeping course as to ensure that you stay within the legal stuff u have to keep accurate records, i would alos suggest investing in a programme such as SAGE and classes on this then u will be able to do your accounts yourself and you will be investing in yourself as well!!!

pm me if you would like some more info

InsideInsurance

olias wrote: »

I think you are just confusing things with VAT. VAT is only relevant if you are exceeding about £70000 a year turnover, which I doubt the OP is likely to do.

Olias

Not true either.... if you mainly sell to VAT registered businesses or sell products that are 0% rated (eg childrens clothes) then you are better off making a voluntary registration as you can claim back the VAT off of your costs and your customers not adversely impacted by the VAT being added.

olias

I'm sorry, but I think you are wrong. The last business I owned, I registered for VAT as the turnover was likely to be over the threshold (it wasn't!) and ended up with unneccessary VAT bills for thousands.

There are very few businesses these days that would sell exclusively zero rated products, and small ebay start up business by a SAHM is unlikely to be selling to VAT registered businesses.

Most small home based ebay businesses are also unlikely to need the services of an accountant, or special bookkeeping skills, or for that matter the purchase of accountancy software etc.

Olias

InsideInsurance

olias wrote: »

I'm sorry, but I think you are wrong.

In what way wrong?

The wifes business sells only childrens clothes online and therefore 0 rated so can claim back 20% of all the materials she buys (she manufactures the clothes) and doesnt charge anything extra.

I sell my services to businesses that are VAT registered so if I charge £500 or £500 +VAT makes no ultimate difference to them as they claim back the VAT they pay but I could claim back the VAT of what I buy.

You are right however in that if you are selling to non-VAT registered companies and standard rated products you shouldn't register until you need to as you are then simply more expensive than your competitors for the same profitability.