Want to start a small home job

nephilim

Hi guys

I am wanting to start my own kilt making business, working from home. I want to be a sole trader, working under my own name. 

I want to know if I am right in thinking this: 

As an example

I buy fabric and materials: £250 trade price all in
I charge the market cost of say £350
I make the kilt - labour cost: £150

So what the totals are

£350 + £150 = £500 (labour and market value of costs)
£500 - £250 = £250 (labour and market value of costs less price of materials = remaining is "profit")

£250 = what I would pay taxes on?

Sorry if this is the wrong place! Just want to make sure I am working right in my head. Thanks!

tacpot12

Your terminology seems a bit off. This is how I would describe it. 

You buy fabric and materials at trade prices, the cost of which is £250.
You make a kilt and sell it for £500.

Your profit is £250. (£500 - £250) This is what you pay Tax on. 

After the tax has been paid, the remaining money is yours. 

You can use this calculator to ive you a good idea of the taxes you will have to pay: Budget for your Self Assessment tax bill if you're self-employed - GOV.UK (www.gov.uk)
 

nephilim

Thanks. As I will be doing this as a supplement to my PAYE earnings, I guess it gets a bit more difficult with the tax etc?

comeandgo

You will have more expenses to offset so you should not be taxed on £250.  You will have insurance, postage, advertising, any vehicle?  Also a small amount for electricity?

DullGreyGuy

Is "market" meant to be mark up?

It is highly likely that there are going to be other costs of sales beyond just the raw materials... how are you going to find customers? How are you going to goods to them? How are you going to take payment? 

Is it all bespoke items or are people buying off the shelf/made to preset options? If the later you also have to factor in returns 

The principle however is the same and particularly easy if doing cash accounting where the profit is simply the difference between the revenue you've received less the expenses you've paid. 

nephilim

Well, lets say, for arguments sake, I make 1, maybe 2 kilts per month, which would bring in *maybe* £500 a month extra (after the expenses above).

Electricity would be lighting in my home - takes about 30-40 hours to fully hand sew a kilt, and it would be outside of my regular working hours, so evenings.
Lighting is maybe around £2 for hours worked in the evenings
Heating in winter would probably also be about £2-5 a week for hours worked but summer is nil. 

Postage charges would be added on top - buyers paying whatever it costs
Advertising - hadn't really thought about it to be honest!
Labels which are sewn into the kilt - they cost me £30 for 200, so 15p per kilt.
Vehicle - I have a car, post office is maybe 1 mile away, so each run would be 2 miles to post office. 

I am guessing that also adds up as expenses, and I guess threads, original outlay for scissors, cutting mats etc would cost as well. 

My expenses on a per kilt basis would be

Lighting - £2.00
Heating - £2.50 (rounded for the years expenses)
Mileage - £0.90
Thread - £3.00-£6.00 (has to be as close a match to the tartan colour, and each spool is around £3)
Label - £0.15

So minimum would be £8.50, max would be around £11.50

As for insurance, not sure my home insurance covers business work except for my WFH stuff already.

Gah lots to think about!

nephilim

DullGreyGuy said:

Is "market" meant to be mark up?

It is highly likely that there are going to be other costs of sales beyond just the raw materials... how are you going to find customers? How are you going to goods to them? How are you going to take payment? 

Is it all bespoke items or are people buying off the shelf/made to preset options? If the later you also have to factor in returns 

The principle however is the same and particularly easy if doing cash accounting where the profit is simply the difference between the revenue you've received less the expenses you've paid. 

yes it is meant to be mark up costs, my apologies.

Payment will be via bank transfer / paypal (depending on which option works best for me)
The items will be all bespoke based on the measurements I take of them, or they send me (and I will ask them to double and triple check measurements, as correction of a kilt can only be done in small increments)

Savvy_Sue

Insurance: check at an early stage! Does your mortgage lender or landlord allow you to run a business from home? Will materials be covered? Will you be covered for clients coming for fittings from home? And so on.

This does seem quite niche. Are you sure there's a market for hand-sewn kilts? If it's a large one, will you come under pressure to make more than you can comfortably manage? Are there restrictions on what tartans can be used and by whom? Will there be people wanting one in a hurry, eg for a wedding, pressurising you?

And if that market is there, why should I choose you, rather than Hamish who's been doing this for years? That's where the advertising comes in ...

I can see it possibly working through word of mouth, BTW, if you have contacts with Scottish Dance groups with a steady intake of new members ... 

Mistral001

Note for tax purpose you should work out your expenses annually.  If you are working from home these should be not more that 25% of the your total home expenditure on light heating etc. otherwise the tax authorities could become curious.  BTW with LED bulbs these days, £2 would light a small workshop or a spare bedroom for several hundred hours.