Question about expenses for first time self-employed tax return

Marmotta_2

I've been doing a bit of selling on eBay, and have made roughly £5k in profit. I've always had my eBay account linked to a separate bank account, so was just working on the assumption that whatever the balance of the account was when I filed my tax return would be what tax was due on. Since I've been using the same account to buy stuff I need for the business, like stationery, packing materials and a couple of other larger purchases, would I be right in assuming that my "profit" figure would already include expenses and consequentially I wouldn't be eligible for the £1k tax free allowance either?

Nearlyold

You can use either your actual expenses or the £1,000 trading allowance, whichever is better for you to offset against your trading income. You can't use both. Obviously most if not all people will choose the higher figure but the choice is yours.
PS. dont forget if using actual expenses you can probably claim expenses other than those you've paid through your dedicated account such as "Use of Home" ie the business related portion of home expenses such as heating, lighting phone bills etc.

Pennywise

Marmotta_2 said:

I've been doing a bit of selling on eBay, and have made roughly £5k in profit. I've always had my eBay account linked to a separate bank account, so was just working on the assumption that whatever the balance of the account was when I filed my tax return would be what tax was due on. Since I've been using the same account to buy stuff I need for the business, like stationery, packing materials and a couple of other larger purchases, would I be right in assuming that my "profit" figure would already include expenses and consequentially I wouldn't be eligible for the £1k tax free allowance either?

Your "assumption" is flawed.  Your "profit" is business income less allowable business expenses.  It's a big leap of faith that the exact same figure turns out to be the bank balance.  Were there no private payments made out of the business account, no transfers to yourself?  Was every single payment made 100% for business, was there no partial private use? Did you pay yourself the exact correct amount for business milage, use of home as office claims, etc?  Were all the business payments allowable expenses (some aren't such as training/learning new skills).

macman

As avove. Even if you view your ebay turnover as a part-time business, you've still got to keep proper records of income and expenditure for tax purposes. You can't just based your s/a return on 'whatever is left in the bank account' at year end! If you did so, you'd be doing yourself out of many of the allowable business expenses that are shared with your domestic expenditure anyway.