Can I list Etsy fees as my expenses?

LouP25

Hello,
I just started selling on Etsy. Made my first sale - realised all the fees I'll be paying. Which is fine. I have 2 options for my self-assessment. Which one is correct? Thank you for any advice. Will be much appreciated.

1) When it comes to doing my tax return, should I write my Etsy fees as expenses? And thus the income will obviously be the profit before the fees.

2) Just list my profit after fees are deducted - and that's all.

magicmarv

In the past I have only listed in my books what Etsy pays out to me monthly, so minus all fees. My accountant didn't flag it so I assume it's ok. It will be interesting to know what others say!

Hoenir

LouP25 said:

2) Just list my profit after fees are deducted - and that's all.

Allowable expenses incurred in running your business maybe deducted to arrive at the net profit. Do you incur packaging costs for example? Boxes, padded envelopes, tape etc would be allowable. 

LouP25

Hoenir said:

LouP25 said:

2) Just list my profit after fees are deducted - and that's all.

Allowable expenses incurred in running your business maybe deducted to arrive at the net profit. Do you incur packaging costs for example? Boxes, padded envelopes, tape etc would be allowable. 

Thanks. I just started selling digital files to see how it goes, so no packaging, etc.. However, I've been selling on Envato for 2 years and paying 5% tax. I assume this Australian Envato tax would be treated the same as Etsy fees - not mentioned in the tax form at all? 

My online business is still small, I earn only around $3000 per year, but as it grows, I'm learning, to avoid mistakes when income is bigger.

saajan_12

LouP25 said:

Hoenir said:

LouP25 said:

2) Just list my profit after fees are deducted - and that's all.

Allowable expenses incurred in running your business maybe deducted to arrive at the net profit. Do you incur packaging costs for example? Boxes, padded envelopes, tape etc would be allowable. 

Thanks. I just started selling digital files to see how it goes, so no packaging, etc.. However, I've been selling on Envato for 2 years and paying 5% tax. I assume this Australian Envato tax would be treated the same as Etsy fees - not mentioned in the tax form at all? 

My online business is still small, I earn only around $3000 per year, but as it grows, I'm learning, to avoid mistakes when income is bigger.

Tax wouldn't be considered an expense in the same way. If eligible, you may be able to claim relief for the foreign tax paid, but that would be separate to expenses. 

Bookworm105

for self assessment purposes you are a self employed "trader"
traders receive income from which they deduct expenses to arrive at profit

you are required to declare both income and expenses on your tax return under the SE section, EXCEPT in the case where you choose to claim the "trading allowance" instead of declaring actual expenses in the expenses section. 

as @magicmarv is using an accountant then it sounds like magicmarv does not really understand their own tax position but lets assume the accountant does, 

in @LouP25 case they need to decide if they are:
a)  claiming the £1,000 trading income allowance (so declare total income and the system will deduct £1K to give net profit on which to pay tax
or
b) declaring income and actual expenses to arrive at profit

Obviously b) is better only when expenses are >£1k.

it is technically wrong to declare only a net income figure (but no one ever reads the instructions!)  
How to fill in your tax return (publishing.service.gov.uk)

Tax-free allowances on property and trading income - GOV.UK (www.gov.uk)


(why is it technically wrong? Because there are thresholds where your total income ("turnover") before costs triggers certain other things so failure to declare turnover may have repercussions.)

martindow

Lou are you operating in Australia as you list turnover in $ and mention an Australian tax?  Comments on here relate to UK tax regulations which are undoubtedly not the same as those in Australia.

LouP25

martindow said:

Lou are you operating in Australia as you list turnover in $ and mention an Australian tax?  Comments on here relate to UK tax regulations which are undoubtedly not the same as those in Australia.

I am in UK. It's just that Envato takes out Australian tax from my sales (well, only 5% per treaty).

LouP25

Bookworm105 said:

for self assessment purposes you are a self employed "trader"
traders receive income from which they deduct expenses to arrive at profit

you are required to declare both income and expenses on your tax return under the SE section, EXCEPT in the case where you choose to claim the "trading allowance" instead of declaring actual expenses in the expenses section. 

as @magicmarv is using an accountant then it sounds like magicmarv does not really understand their own tax position but lets assume the accountant does, 

in @LouP25 case they need to decide if they are:
a)  claiming the £1,000 trading income allowance (so declare total income and the system will deduct £1K to give net profit on which to pay tax
or
b) declaring income and actual expenses to arrive at profit

Obviously b) is better only when expenses are >£1k.

it is technically wrong to declare only a net income figure (but no one ever reads the instructions!)  
How to fill in your tax return (publishing.service.gov.uk)

Tax-free allowances on property and trading income - GOV.UK (www.gov.uk)


(why is it technically wrong? Because there are thresholds where your total income ("turnover") before costs triggers certain other things so failure to declare turnover may have repercussions.)

Thank you so much. I really have to think about what you said. It may take me some time to understand completely, but I'll have to study this. Thanks once again.

JennyDavis

Simply listing your profit after fees are deducted without separately accounting for those fees and other expenses is not advisable

Bookworm105

JennyDavis said:

Simply listing your profit after fees are deducted without separately accounting for those fees and other expenses is not advisable

no advisability about it.
you are not permitted to declare a net income figure under any circumstances
either you declare both income and actual expenses separately 
or you declare total income and claim the trading allowance in lieu of actual expenses

if you declare income net of etsy fees then you are double counting the expenses if you then claim the trading allowance on top of that.

if you declare the net income and no expenses at all then you are potentially overstating your profit as you are forgoing the trading allowance (assuming fees <£1,000 total)