I didn't realize how hard it is to run a business!!! :-)

cheesemelts

Get an intern!

Kayalana99

Laurajo wrote: »

http://businessplusbaby.com/2010/12/13/self-employment-during-your-maternity-pay-period/

:rotfl:

You have no idea how much googling I did and I couldn't find the answar to this. I will double check that soon, but thank you.

FYI, 'my' business is techinally my partners ...it does mean I pay full whack tax this year but the plan was to not earn anything (buy buying more stock etc etc) this year and next year turn it into a partnership with me on their properly...

Suarez

Buying more stock won't reduce your tax bill.

Kayalana99

Suarez wrote: »

Buying more stock won't reduce your tax bill.

You only pay tax on your profit.

Knalchemist

Would you consider taking someone on, on an unpaid, work experience basis to do your accounts?

My partner has recently completed his AAT qualifications (Accounting), and is seeking related, UNPAID, work experience.

Laurajo_2

Kayalana99 wrote: »

You only pay tax on your profit.

You only get relief for the cost of stock when the item is sold.

Say you bought five items for £500. You sold three during the tax year for £1000 each.

You therefore have sales of £3000.

You have costs of £2,500 in total, however you need to deduct the cost of any stock you have left (which would be two). Therefore your cost of sales would be £1,500.

So stock held at year end won't reduce your tax bill.

Kayalana99

Laurajo wrote: »

You only get relief for the cost of stock when the item is sold.

Say you bought five items for £500. You sold three during the tax year for £1000 each.

You therefore have sales of £3000.

You have costs of £2,500 in total, however you need to deduct the cost of any stock you have left (which would be two). Therefore your cost of sales would be £1,500.

So stock held at year end won't reduce your tax bill.

Right. I'm holding my hands up and probably going to get a book keeper if this is right I can't get my head around this.

If I have NO sales to make this easier, does this mean if I brought £500 of stock I would have to pay (20% for arguement sake) £100 tax?

What if next year I had no sales and £500 stock would I pay £125 again?

That just doesn't work in my head at all.

Ok edit -

I guess if I brought £500 stock that I would sell for £1000 and I sold half I would have £500 sales n £250 stock...so Id pay £50 tax?

How to big companys manage to work out how much stock then have left? I dont understand it. I sell things in singles / packs so its going to b xtremly hard to work out how many ive sold and counting them is going to be a nightmare...put it this way a 2 thousand of them fit in a shoe box!

Kayalana99

Knalchemist wrote: »

Would you consider taking someone on, on an unpaid, work experience basis to do your accounts?

My partner has recently completed his AAT qualifications (Accounting), and is seeking related, UNPAID, work experience.

Sorry but Id rather like to have someone I can build a relationship with and see face to face, if you'd have been local I would of thought about it but I am no where near London.

Laurajo_2

Kayalana99 wrote: »

Right. I'm holding my hands up and probably going to get a book keeper if this is right I can't get my head around this.

If I have NO sales to make this easier, does this mean if I brought £500 of stock I would have to pay (20% for arguement sake) £100 tax?

What if next year I had no sales and £500 stock would I pay £125 again?

That just doesn't work in my head at all.

Noooo....if you have no sales you wouldn't have any profit, so no tax!

Look at it this way - by adjusting for closing stock you are matching the 'income' for the sales to the cost of that 'stock'.

At the year end, you take your total purchases, then deduct the cost of any stock you have left. The balance is the amount you will deduct from the sales.

Your closing stock will be next years opening stock, so next year your total 'expense' will be the opening stock, stock purchased in the year, less any stock held at year end, and so on.

Sorry, I'm probably not explaining this very well!

scragend

Kayalana99 wrote: »

Right. I'm holding my hands up and probably going to get a book keeper if this is right I can't get my head around this.

If I have NO sales to make this easier, does this mean if I brought £500 of stock I would have to pay (20% for arguement sake) £100 tax?

What if next year I had no sales and £500 stock would I pay £125 again?

That just doesn't work in my head at all.

No, in that case you wouldn't pay any tax because you wouldn't have any income to start with.

However you wouldn't have a taxable loss of the £500 that you had paid out. The calculation to arrive at gross profit is turnover less cost of sales. Cost of sales is opening stock + purchases - closing stock, so in your example it would be 0 + 500 - 500 = nil.

So turnover of nil, less cost of sales of nil equals nil. If you follow!

What Laurajo said was spot on.