Starting a new business - a couple of questions please

[Deleted User]

Hi,
I'm looking at starting my own business soon and just looking into what you can and cannot claim as Allowable Expenses. I've been reading on the HMRC website and just want to confirm a few things if that's ok?

For example - under allowable expenses it states that this includes 'the cost of goods bought for re-sale'. I will be buying stock, checking and re-selling, so just to confirm, every time I buy stock with this intention, the value comes off what I owe in tax at the end of the financial year?

I will also be getting a storage unit, and again under Allowable Expenses, it states 'rent for business premises', so does this mean that if my storage rent is £400/month, then I can claim this amount off what I owe in tax?

I also read somewhere about claiming back Paypal fees? If I sell lots of items, is there an easy way to check how much £££ in paypal fees I've paid? I presume ebay fees can't be allowed, surely?

I've already worked out the flat rate per mile for vehicle usage and the simplified home expenses rates, but hope you can help me with my other queries, thank you :-)

CLAPTON

purpleposting4 wrote: »

Hi,
I'm looking at starting my own business soon and just looking into what you can and cannot claim as Allowable Expenses. I've been reading on the HMRC website and just want to confirm a few things if that's ok?

For example - under allowable expenses it states that this includes 'the cost of goods bought for re-sale'. I will be buying stock, checking and re-selling, so just to confirm, every time I buy stock with this intention, the value comes off what I owe in tax at the end of the financial year?

I will also be getting a storage unit, and again under Allowable Expenses, it states 'rent for business premises', so does this mean that if my storage rent is £400/month, then I can claim this amount off what I owe in tax?

I also read somewhere about claiming back Paypal fees? If I sell lots of items, is there an easy way to check how much £££ in paypal fees I've paid? I presume ebay fees can't be allowed, surely?

I've already worked out the flat rate per mile for vehicle usage and the simplified home expenses rates, but hope you can help me with my other queries, thank you :-)

yes and no


allowable expense come off your profit and not off the tax

obviously lower profits mean less tax

so the effect of higher allowable expenses will reduce you tax bill by 29% ish (20% tax and 9% NI) of the expenses

zygurat789

Any expense which is incurred in earning your sales income is an allowable item whether it be ebay, paypal or your accountants's fee

[Deleted User]

Thanks Clapton, I understand that any expense comes off my total profit and then I'm taxed on what's left, sorry if I sound really confused! I just wasn't completely sure if I was reading things correctly!
So, I can claim stock bought for re-sale and business storage rent as allowable expenses - that's great :-)


I'm not sure I understand your last sentence though? (I apologise in advance if this is really obvious, my head hurts!)

[Deleted User]

zygurat789 wrote: »

Any expense which is incurred in earning your sales income is an allowable item whether it be ebay, paypal or your accountants's fee

So after I've sold items through ebay, I can count the ebay fees and the paypal fees as expenses too and therefore not have to pay tax on these amounts?

keaton

CLAPTON wrote: »

so the effect of higher allowable expenses will reduce you tax bill by 29% ish (20% tax and 9% NI) of the expenses

Sorry I don't understand this ( maybe I'm just tired) are you basically saying that you are taxed on the profit after all out goings (eg, rent, purchases, fee's and such) have been deducted, and tax and ni come to around 29%?

Thanks.

CLAPTON

keaton wrote: »

Sorry I don't understand this ( maybe I'm just tired) are you basically saying that you are taxed on the profit after all out goings (eg, rent, purchases, fee's and such) have been deducted, and tax and ni come to around 29%?

Thanks.

you work out your profit
which is the difference between your turnover (sales) and your allowable expenses (costs)

the tax is based on your profit

however you have a tax allowance of 10,000 thereafter you pay 20% tax for the next 31,865

also you pay class 4 NI which is 9% of the amount over 7956

and class 2 NI at £2.7 per week

check the exact amounts but that's the general idea

MichelleUK

purpleposting4 wrote: »

For example - under allowable expenses it states that this includes 'the cost of goods bought for re-sale'. I will be buying stock, checking and re-selling, so just to confirm, every time I buy stock with this intention, the value comes off what I owe in tax at the end of the financial year?

You can only claim it if you have sold it on. At the end of the year, you should count up all of your stock that you have not sold and deduct this amount from the total purchases. So, the amount that you can claim would be:

Opening stock + Purchased Stock - stock at year end = cost of goods sold

purdyoaten

purpleposting4 wrote: »

Thanks Clapton, I understand that any expense comes off my total profit and then I'm taxed on what's left, sorry if I sound really confused! I just wasn't completely sure if I was reading things correctly!
So, I can claim stock bought for re-sale and business storage rent as allowable expenses - that's great :-)


I'm not sure I understand your last sentence though? (I apologise in advance if this is really obvious, my head hurts!)

I hope that you will not be offended if I suggest that, by the very nature of your questions, that you do not attempt this yourself - at least in the first few years. Attempting to save on accountancy fees. the one expense which could save you most money, could cost you in the long run

trailingspouse

Repeat after me - talk to an accountant, talk to an accountant.

This is complicated stuff, and needs to be done right. They will save you much in both money and broken sleep.

I'm off to see mine tomorrow. I'm going to suggest he puts me on commission...

zygurat789

purpleposting4 wrote: »

So after I've sold items through ebay, I can count the ebay fees and the paypal fees and your accountants fees as expenses too and therefore not have to pay tax on these amounts?

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