Starting an on-line shop

ste1200

Hi, I am very interested in starting an online shop selling vinyl. I have been collecting vinyl for over 10 years now and have a collection which I want to start selling on my own website. I also have sources where I can buy in bulk and split down for re-sale.

I have found a suitable website host, but I want to do it properly and legally.

I just don't really know where to start with this. Do I need to register self employed ? I am currently employed but want to do this as a sideline. Do I need to register a company name ?

I wont be employing anyone, and don't need a wage from it. Do I need to pay tax on the profit ? I don't want to launch this site yet as I'm not sure how legal it is for me to make money from this without informing anybody.

Any advice would be great.

Thanks

pinkteapot

In terms of the tax side:

You have to tell HMRC within 3 months of starting to trade. You can register as a sole trader - all you do is phone them up and tell them. They will ask for the company name which can be a proper company name or just your own name.

You will continue to just pay tax PAYE on your employed earnings. You will be sent a tax return each April which you have to fill in. You'll fill in details of your employment income in the 'Employment' section from your P60, and then you fill in your online shop finances on the 'Self-Employed' page.

You will pay tax on any profit made. Your tax-free allowance is already used up in your main employment so you pay tax at the highest rate you currently pay on all profits from the other business.

All you have to write on your tax return is revenue (money in), costs (money out) and profit (positive or negative). If you make a net profit then you will receive a tax bill for it.

A few years ago I did some freelance writing in my spare time and did this and it was very straightforward. The HMRC helplines are very good.

QueenieB

As above, but also read the Distance Selling Regulations. Then have a good laugh, realise they aren't joking, and have a stiff drink!

InsideInsurance

Hosting is one of the last things you should sort out!!

You are selling items other than just your own secondhand items and so it is a business. You have a number of options as to how to run the business and the simplest is as a sole trader (aka self employed). All you legally need to do is register as a sole trader with HMRC, make the additional NI payments and once a year do a tax return.

The self assessment tax return you complete has your employed and self employed info put on it and then calculates if you have under or overpaid your tax.

Anything else like a business bank account would be optional as you and the business are legally the same entity. That said, many find it easier to keep track of things with a business account and many consider it sensible to buy liability insurance as otherwise if someone was to sue you - remember you and your business are the same so your house, car etc could be taken if you couldnt otherwise afford to pay the damages.

ste1200

Cheers for the info. I would value my collection (stock) at about £8,000. Would the 'business' need to buy this from me ? If I were to presume I make £8,000 profit in the first year, would this mean I wouldn't pay tax on this for the first year ?

Owain_Moneysaver

You will also have to comply with all the consumer protection legislation such as the e-commerce regulations, the distance selling regulations, etc.

mrsyardbroom

make the additional NI payments

You don't need to pay any extra NI until your earnings go over the current threshold. Contact the National Insurance office to find out about small earnings exemption. I've had a shop on my website for several years but it did take a while to climb the google rankings and start earning some money. I just use affiliate marketing rather than stocking the goods myself. Good luck with your site and with your business.

Lester_Jones

I am thing about doing something similar.
Handy thread.

mrsyardbroom

Here's all the info on tax and National Insurance. http://www.hmrc.gov.uk/working/intro/selfemployed.htm
It includes info on the small earnings exception and information on registering as self employed.

pinkteapot

Oooh yes I completely forgot about NI! When I did my self-employed work it was £29.30 per quarter.

In terms of the business buying the stock from you, I don't know how/if you do that accounting-wise. Depending on how much you're trading, you may find it worthwhile employing a small business accountant. My brother is a full-time plumber and his accountant charges £250 per year IIRC. He (my brother) keeps all his receipts and invoices filed neatly which makes it easy for the accountant to do his thing. Turn up at year-end with a carrier bag full of disorganised papers and they'll charge you more. Although an accountant costs, they'll know absolutely everything you can legitimately write off against your business and reduce your tax liability as far as possible. For example, if you are trading from home you are allowed to put a percentage of your electricity bill down as a cost of the business (reducing your profit). I don't know the ins and outs of how much you can put through this way.

ste1200

I don't think I would be making loads of profit, probably less than £5K, but you never know ! Thanks for all the info.