Self Assesment - Stock carried over

kemo_2002

Hello

im looking for a bit of advice, when it comes to end of year profits, i will be roughly showing 5k net profit. I will have around £500 worth of stock for next tax yer (this is cost price. Most of it is pieces of wood, pallets, boards that i have bought but will not have used by april)

how does this work with declaring profits? do i add £500 onto profits fo my self assesment?


Im really comfused!

Thanks:beer:

zygurat789

Amount of stock in hand at beggining of period PLUS
Amount spent on goods for resale in period
LESS Stock in hand at the end of the period.

All values are cost, what you paid for them.
This givers you a value for Cost of sales, if you deduct this from Turnover you have Gross profit and if you deduct allowable expenses you have net (taxable) profit.

kemo_2002

zygurat789 wrote: »

Amount of stock in hand at beggining of period PLUS
Amount spent on goods for resale in period
LESS Stock in hand at the end of the period.

All values are cost, what you paid for them.
This givers you a value for Cost of sales, if you deduct this from Turnover you have Gross profit and if you deduct allowable expenses you have net (taxable) profit.

so i have to go back and work out everything i have spent on stock throughout the year, deduct what i have left..

eg

£7000 stock bought for whole year
minus £500 left

is £6500 minus expenses £2000

=£4500 to declare?

what would happen if i have more stock, say £1500

£7000 minus £1500, minus £2000 expenses

= £3500...yet i have stock to resale next tax year

zygurat789

kemo_2002 wrote: »

so i have to go back and work out everything i have spent on stock throughout the year, deduct what i have left..

You should be keeping the total throughout the year.

eg

£7000 stock bought for whole year
minus £500 left

is £6500 minus expenses £2000

=£4500 to declare?

what would happen if i have more stock, say £1500

£7000 minus £1500, minus £2000 expenses

= £3500...yet i have stock to resale next tax year

You are reducing your cost os sales this year (by the value of stock in hand at the year end) and increasing next years cost of sales with the value of items not bought in the year (ie stock at year end bought last year)
If you had more stock you would have used less goods to produce your finished articles and made more profit.

What you spend on goods for use in resale should be a discreet column in your books (of account) so that the total is readily available. Stock on hand at the year end is only available once, at the year end. The value can be calculated later but the quantities MUST be taken at the end of the day of the year end.

kemo_2002

zygurat789 wrote: »

You are reducing your cost os sales this year (by the value of stock in hand at the year end) and increasing next years cost of sales with the value of items not bought in the year (ie stock at year end bought last year)
If you had more stock you would have used less goods to produce your finished articles and made more profit.

What you spend on goods for use in resale should be a discreet column in your books (of account) so that the total is readily available. Stock on hand at the year end is only available once, at the year end. The value can be calculated later but the quantities MUST be taken at the end of the day of the year end.

the reason i am asking is i am trying to work out if i would be better off buying the stock this tax year or next. and what difference that will have on my tax bill, ive got to buy it, but i dont know if it will effect my tax bill this year or next?

If i buy this tax year will i pay more or less tax (this year) than if i buy it next tax year (pay more tax next year providing i sell them all?

in an ideal world i would rather have higher next profit next tax year than this tax year

i hope that makes sense :cool:

zygurat789

kemo_2002 wrote: »

the reason i am asking is i am trying to work out if i would be better off buying the stock this tax year or next. and what difference that will have on my tax bill, ive got to buy it, but i dont know if it will effect my tax bill this year or next?

If i buy this tax year will i pay more or less tax (this year) than if i buy it next tax year (pay more tax next year providing i sell them all?

in an ideal world i would rather have higher next profit next tax year than this tax year

i hope that makes sense :cool:

Think about it. If you buy more stock on the day before your year end will it increase your profit.
Profit is sales less cost of sales
Cost of sales is all you purchase less what you haven't used.
Do some imaginary examples if it helps , it's only two subtractions.

And, yes, I'm deliberately not telling you straight out the answer because it is important that someone running their own business can answer this question. I hope others will go along with me on this.
Read and reread my answer above and you should have your answer.
Let me know what it is please.

kemo_2002

zygurat789 wrote: »

Think about it. If you buy more stock on the day before your year end will it increase your profit.
Profit is sales less cost of sales
Cost of sales is all you purchase less what you haven't used.
Do some imaginary examples if it helps , it's only two subtractions.

And, yes, I'm deliberately not telling you straight out the answer because it is important that someone running their own business can answer this question. I hope others will go along with me on this.
Read and reread my answer above and you should have your answer.
Let me know what it is please.

think i need an accountant :rotfl:

kemo_2002

kemo_2002 wrote: »

think i need an accountant :rotfl:

thanks for your help on this

zygurat789

kemo_2002 wrote: »

think i need an accountant :rotfl:

Yes you just have to think.

You have your sales A
you have your goods purchased B
you have your stock C


B - C = cost of sales D
A - D = Gross profit

So if you buy extra stock £100 before the year end, all of which you do not sell and therefore it increases stock then

You have your sales A
you have your goods purchased B + £100
you have your stock C + £100

(B + 100) - (C + 100) = cost of sales D

You see why maths at school is so important