Sole Trader Advice Please

NewStart3r

So I’m at the very start of my ‘sole trader’ journey. 

I have been selling a lot of my own personal second-hand items online for the last couple of months and recently started buying items to sell on too. So that has led to me registering with HMRC as a sole trader as I want to continue doing it. 

I only submitted it to HMRC today, so I’m waiting on the likes of confirmation, the UTR, etc. 

In the meantime, I have an ever-growing list of questions that I’m hoping some of you might be able to impart your wisdom on. Any advice (even if I haven’t asked a question about it) would be greatly received.

Here we go: 

• Can I buy stock on a personal credit card whilst I wait for the UTR number so I can apply for a business account?
• If yes to the above, how do I/what do I need to do to prove it is a business expense and record it correctly in my tax return?
• I’ve been selling some second-hand stuff (pre-registering with HMRC) through a website where I set up a username that was not my real name. The invoices which come through are with this username - am I still able to use these as proof of invoice/sale?
• If there is further second-hand stuff (that I personally owned) that I wish to sell, is there a way I can offset its value from the money I make?
• If I want to venture into more than just buying and selling, is it possible to just go ahead and do this or is there something else I need to do beforehand? 

I think that is all (for now)! If I have any more I’ll add them in or post them separately in the thread. 

Thanks ever so much for taking the time to read this and as I say, any advice you can share will be hugely appreciated.

DullGreyGuy

1) Just remember that as a sole trader there is only you, your business isnt a seperate legal entity as it would be if you had incorporated and formed a company.  As such you can use whatever funds you want to buy your stock however your personal credit card may have T&Cs that prohibit business use... if you are buying stuff off ebay or junk shops to relist online then its fairly low risk that your bank would start thinking its business use.


2) You just need an invoice/receipt, this wont "prove its for business use", nothing does that directly but you'd presumably be able to show its up for sale etc.

Note that tax returns are done at a very high level. You need to keep detailed records in case HMRC ever challenge you (they have 6 years to do so) but only summary numbers get submitted.


3) Sale = tax due... HMRC will rarely ever question if you present an invoice as income if it was actually your income... they are concerned about people understating revenues, not overstating them


4) Dont understand the question? What are you going to "offset"? The cost of sale? You;d only be able to offset anything if you count it as revenue for your business (and you cannot consider the original purchase as it wasnt a business purchase)


5) Depends what you want to do... for most things as a sole trader you simply can do it unless its a trade that requires specific qualifications or licenses. It may also bring in other considerations like insurance (both your personal and your business), planning permission etc


Where are you currently storing your stock awaiting sale? If its at home is this allowed under the terms of your mortgage/lease/tennancy? It almost certainly would invalidate your home insurance too unless you've declared it (and most wont cover holding stock at home)

Jeremy535897

Specifically on your question about selling stuff you originally bought with no intention of selling it, probably the correct technical analysis is to value it at the date you decided it became an asset of your business, and treat this as its cost. From a practical point of view, you could just omit the sale from your books, but it is then conceivable that questions might be asked one day by HMRC.

Generally, have a read of:
https://www.litrg.org.uk/tax-guides/self-employment

Don't be put off by the "low income" description.

Mistral001

Just a few pointers that might be of help:

It is not always essential to have a business account when in buisness.  Many banks will allow you to use your personal account if you are a sole trader, if the business transactions are not too many.  I was a sole trader for 25 years and used my personal bank account for all of that time with my bank's full knowlege of my business activities.

A business expense generally is an expense that is solely in connection with your  business activities. Use of home is an allowable expense, but if you claim fore more than about £500 a year it generally needs to be itemised and if it is more than about 25% of your total home expenses, you might run into problems with Planning Laws and have to pay capital gains tax on your house if you sell it.  Also note there are some rules which seem strange at first glance, such as the cost of taking a client out to lunch is not an allowable expense, whereas the cost of occasional taking employees out to lunch is allowable.   And yes a sole trader can have employees.   

Jeremy535897

There are simplified expense claims for working from home for self employed people who don't want to itemise everything:
https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Also for other items like vehicles (see links in the above document).

Expenses have to be incurred wholly and exclusively for the purposes of the trade to be deductible. You can claim the business proportion of expenses involving both private and business elements (like a mobile phone).