Ebay business sellers, what % profit is acceptable

baffcat

Another thing to think about, if you're going to go for broke and register for VAT, is that you'll have to pay VAT on all your sales up to that £73k too.

As my VAT input is tiny compared to what VAT output would be on my sales, I'd have to sell £8-10k more than I do now just to cover the VAT I'd have to pay out if I registered.

Like a lot of other people, I stick below the VAT limit (on a rolling basis, checking it every month) on purpose, and to get back to your original question, I look for a minimum nett profit (on which I'm taxed) of 65% of my my turnover. That means after the expense of ebay fees, paypal fees, postage, packing and cost of stock.

If I'm going to go over the limit, I stop selling for a while.

Having had a £2m turnover business, with 22 employees, I'm far happier existing on less, but with far less hassle from VAT, employees & HSE.

kaza

baffcat wrote: »

Another thing to think about, if you're going to go for broke and register for VAT, is that you'll have to pay VAT on all your sales up to that £73k too.

As my VAT input is tiny compared to what VAT output would be on my sales, I'd have to sell £8-10k more than I do now just to cover the VAT I'd have to pay out if I registered.

Like a lot of other people, I stick below the VAT limit (on a rolling basis, checking it every month) on purpose, and to get back to your original question, I look for a minimum nett profit (on which I'm taxed) of 65% of my my turnover. That means after the expense of ebay fees, paypal fees, postage, packing and cost of stock.

If I'm going to go over the limit, I stop selling for a while.

Thanks, think I will stay under the £73000 for now.

Having had a £2m turnover business, with 22 employees, I'm far happier existing on less, but with far less hassle from VAT, employees & HSE.

Think i will stay under the threshold for now.
thanks

blue_monkey_2

baffcat wrote: »

Another thing to think about, if you're going to go for broke and register for VAT, is that you'll have to pay VAT on all your sales up to that £73k too.

As my VAT input is tiny compared to what VAT output would be on my sales, I'd have to sell £8-10k more than I do now just to cover the VAT I'd have to pay out if I registered.

Like a lot of other people, I stick below the VAT limit (on a rolling basis, checking it every month) on purpose, and to get back to your original question, I look for a minimum nett profit (on which I'm taxed) of 65% of my my turnover. That means after the expense of ebay fees, paypal fees, postage, packing and cost of stock.

If I'm going to go over the limit, I stop selling for a while.

Having had a £2m turnover business, with 22 employees, I'm far happier existing on less, but with far less hassle from VAT, employees & HSE.

This is not always the case, it really does depend on her business so there is no need to scare her.

I didn't pay VAT on the sales to 73k, just from the point of registering - which was an extra month after I went over the limit. If they are going to charge you the VAT on that then they also need to refund you all the VAT you have paid out too. However, you can claim the VAT back for everything you have left in stock and on things you have bought for the business in the last 3 years. I got a big VAT refund for the first one I did - about 5k if I recall.

It depends on what the OP is selling though, a lot of my sales go outside the EEC so I earn much more being registered, than the others who are not registered, do - I have been registered for 5 years and I have only had to pay VAT the once, because I sell a lot overseas but my stock is bought in the UK, I usually get a VAT refund. Not everyone only sells within the UK.

Plus you save on your eBay fees as well because they then become VAT exempt for VAT registered businesses so that saves you money too. If you are spending 10k a year on eBay fees then you'll save about £1700 on fees a year too. How much are your fees each month?

The paperwork is absolutely minimal with an accounting package anyway - which also does your end of years figures as well so saves you work there if you are using an accounting book now as you'll have to balance the figures, packages do it all for you and you can obviously put that through the business.

VAT seems scary but it does not have to be, best thing I have ever done.

Hammyman

kaza wrote: »

Think i will stay under the threshold for now.
thanks

If it helps, you can set up a second company. As long as both companies stay under the VAT threshold then you don't have to register for VAT even though the sum total of the two exceeds it.

kaza

Hammyman wrote: »

If it helps, you can set up a second company. As long as both companies stay under the VAT threshold then you don't have to register for VAT even though the sum total of the two exceeds it.

I had wondered about that actually, it is definately an idea.

I dont sell a lot outside of the eec, so it wouldn't be beneficial from that point of view.
My ebay fees are about £400-£500 per month.

Think I will stay as I am for the moment.

thanks everyone

Karen

baffcat

blue_monkey wrote: »

This is not always the case, it really does depend on her business so there is no need to scare her.

VAT seems scary but it does not have to be, best thing I have ever done.

You're right, I didn't explain that very well. What I meant to say was that in any subsequent year, I would need to sell £10k more to be in the same position as prior to registering.

Hammyman wrote: »

If it helps, you can set up a second company. As long as both companies stay under the VAT threshold then you don't have to register for VAT even though the sum total of the two exceeds it.

Be very, VERY careful about trying to avoid registering like that.

My accountant said it would be very easy for HMC&E (I'm old, see) to think I was trying to avoid tax by doing something similar.

Eventually, the only way I could keep below the thresh-hold for one year was for all my ebay sales to be as a sole trader, and my wife started supplying a service which didn't invlove selling through, or buying from ebay, and could be seen to not cross-trade with me.

A lot of holding companies have to use one VAT number for any number of owned companies, rather than set up individual registrations.

As usual, I'd suggest talking to an accountant rather than trusting any advice we give.

Strapped

macfly wrote: »

A lot of Sage fans. I personally find it overkill. Many traditional accountants promote it because they trained with it.

I do too - a spreadsheet for income and expenditure will suffice for most small eBay businesses. And OpenOffice is free.

StaffsSW

Best advice I could give from being in the same position is to get the best accountant you can afford. There is no such thing as a cheap and good accountant either... You can have one or the other. A good accountant will cost you in fees (which are tax deductable), but their fees should be offset by the tax savings they can make you. A cheap accountant will simply fill in the boxes from the figures you provide.

Again from experience, it may be worth converting from a sole trader to a single director Ltd company, draw a nominal salary, then enjoy a tax free dividend from the business and drawings from a Directors Loan Account. You will still pay tax through the business profits, but your personal tax can be negligible. It may upset the socialists and anti-banker types, but there is nothing illegal about it. You can also do things like take salary sacrifice and pay into a pension through the business as well.

kaza

Strapped wrote: »

I do too - a spreadsheet for income and expenditure will suffice for most small eBay businesses. And OpenOffice is free.

Just downloading that now, will have a look.

Thanks everyone so much for the advice you have offered and the time you have taken to give it.

Hammyman

blue_monkey wrote: »

Also once you turn over more than 15k they will want a breakdown of your outgoings on your annual self assessment - you can no longer put your figure for sales/purchases, they want to know how much you have spend on what purchases.

Not any more. It changed this year. AFAIR, it was £70k on the 2010-2011 Self Assessment form.

Yep, just checked the PDF copy of mine and it states on page 11 "Self Employment (Short):

If your annual turnover was below £70,000 you may just put your total expenses in box 19, rather than filling in the whole section.