Am I calculating this wrong?

Sky_Shrimp

I'm planning on selling secondhand items on eBay.
If a seller earns over £37,701 then they'll pay 40% tax on their profits.
Earning over £967 per week means you'll pay 2% NI.
If a seller earns over £85K, they have to register for VAT.
If a seller only sells secondhand goods, they can use a VAT margin scheme, so they'll be charged an additional tax of 16.67% on their profits which can't be claimed back.
So does that mean sellers have to pay 58.67% in taxes on their NET profits if they earn over £85K?
For example, if a seller bought a used item for £300 and sold it for £400, they would have made £100 profit. Would they have to pay HMRC £58.67?

martindow

I think you're confusing personal taxation and VAT.  If your turnover is over £85k or you have voluntarily registered below this, you will have to collect VAT on your sales but you can set off VAT elements of your expenses against this or use the margin scheme.  Unless your business is a disaster you will pay cash every quarter to settle your VAT bill.

You then, as a sole trader, pay tax on your profits and national insurance.  If you are also working on PAYE this will mop up your tax free allowance and possibly push you into the higher tax band.

If your business is successful you make money and you (rightly) pay tax on it.  In your example if you are not VAT registered the profit on the item is £100 but you will have expenses running any business so the taxable figure will be less than this.

If VAT registered, you are buying for 250 +VAT and selling at 333.33 +VAT so your profit is £83.33 (less expenses) which will be taxed as personal income.