Self Assessment Query

Aeraeni

Hey there,

When calculating income for my first tax return, does remaining unsold stock that I still possess at years end, count as profit in addition to the money that came in from sales?

I'm doing an end of year stocktake to appraise the value of my remaining stock, and I'm just trying to understand precisely how the overall income is worked out.

I know that the sales figure has the costs of good and then materials/expense figures removed from it, but I'm just not sure where the stock value figure fits in.

Thanks in advance!

MX5huggy

Your stock is not counted as profit until it is sold.

So if you purchase £5000 of stock. Have £1000 of other costs. Sell half the stock for £8000. Your profit is £2000 which you have to pay tax on the tax period covered by the sales and purchases.

If in the next period you sell the rest of the stock for £7000 and you have £800 of costs your profit would be £6200.

You only start worrying about stock value when doing company accounts (which I presume you don't do as you are a sole trader?) not personal tax return.

morgani

Your stock does not affect your sales but does affect your gross profit.

You cost of sales should be made up of

Opening stock + purchases - closing stock

This applies whether you are a sole trader, partnership or limited company.

Aeraeni

Sorry if this is me being silly, but unless I've misunderstood, it seems as though the things you two have said contradict each other.

Can someone please clarify this?

DebtDaemon

Morgani is correct.