Postage costs and the taxman

VH

Hi folks

This question is aimed at those of you who trade on EBay. For those of you who declare your income to the taxman, how do you handle postage?

For example, if it costs you £5 to post an item out, and you charge the buyer £5, I presume this is a tax-deductible expense(?).

However, if you charge £10 and make a fiver on the postage, do you declare £5 extra profit to the taxman?

And how do you you prove postage costs if challenged?

Just wondering how people dealt with this, I find it a most confusing issue. Forgive me for being naive.

Cheers

PASCALI

Any profit you make on postage is taxable.
You can get a receipt for stamps and other postage costs from Post Office

criminal_smile

VH wrote:

And how do you you prove postage costs if challenged?

Just wondering how people dealt with this, I find it a most confusing issue. Forgive me for being naive.

Cheers

When you say prove postage costs when challenged, are you asking how to justify charging £5.00 postage for an item that was sent with a 1st class stamp on it?
If this is the case, then you have to read postage and packaging when justifying costs. Envelopes, pens to write on them. Bit of sticky tape to make sure it doesn't fall out of the envelope, and of course the time taken to wrap it all properly. All of these costs need to be taken into account when looking at an ebay postage.

HairyHatMan

Income to be declared is Total Selling Price (including any postage 'fees'), less cost of item (always get a receipt), less ebay fees (keep all invoices), less Paypal fees (keep all 'invoices'), less actual postage cost (always get a receipt), less allowance for travel to PO / bank @ 42p/mile.

Packaging materials bought in bulk also down as expenses (keep receipts).

Common thread - keep everything !

A friend of a friend of a friend......... was picked at random by the IR last year for an audit. They went through every single expense / receipt / income for 5 years!

VH

criminal_smile wrote:

When you say prove postage costs when challenged, are you asking how to justify charging £5.00 postage for an item that was sent with a 1st class stamp on it?
If this is the case, then you have to read postage and packaging when justifying costs. Envelopes, pens to write on them. Bit of sticky tape to make sure it doesn't fall out of the envelope, and of course the time taken to wrap it all properly. All of these costs need to be taken into account when looking at an ebay postage.

You misunderstand, that was just a bad example. I'm not asking how to rip people off, on the contrary, I never overcharge for postage!

What I mean is, if it costs you £5 to post something and you charged £6, do you declare the £1 to the taxman. And how do you calculate the 'correct' cost of the postage for tax purposes.

For example, if is costs £4 to post the item, plus £1 for a jiffy bag, and you make £1 profit, do you declare the £1 profit to the taxman? As you say there are also other things to take into account like sellotape, pens, ink, etc. Also is it reasonable to take things into account like petrol costs to drive to the post office?

Just that I am thinking of doing EBay full time at some point and it seems that postage is a bit of a grey area!

I would hope that you can justify a 'reasonable cost of postage' to the taxman without being challenged, but cannot find any definitive answer on the subject.

I would be interested to see how other people actually do it!

criminal_smile

np VH, just wasn't sure what you were asking. As far as I'm aware, ALL reasonable expenses (ie where you have to put your hand in your pocket), could be classed as legitimate business expenses. Like HHM said in the previous post to yours, keep receipts for everything.
I think that sort of practice would make for a very smooth audit should it ever happen to you.
big pile of shoeboxes under the bed should do the job......... :rotfl: