Losses on eBay Goods - tax relief?

regency_man

I think I'm OK with the general cash accounting that's been mentioned... but I'd have had no idea about having to pay NI if my profits went over £6725.  

So in summary, I should start my 'business' from Apr 2023 by registering as self employed.  Do cash accounting, which for 23/24 is going to show as a overall loss due to the cameras bought and not sold so presumably I won't have to pay any tax on that?  Will the loss get me relief on my overall income tax then, including my PAYE job (essentially reducing my overall taxable income by the amount of the loss?)

TheSpectator

regency_man said:

I think I'm OK with the general cash accounting that's been mentioned... but I'd have had no idea about having to pay NI if my profits went over £6725.  

So in summary, I should start my 'business' from Apr 2023 by registering as self employed.  Do cash accounting, which for 23/24 is going to show as a overall loss due to the cameras bought and not sold so presumably I won't have to pay any tax on that?  Will the loss get me relief on my overall income tax then, including my PAYE job (essentially reducing my overall taxable income by the amount of the loss?)

Seriously, get an accountant to get you on your feet. You are so far out your depth here.

Bookworm105

regency_man said:

Bookworm105 said:

regency_man said:

Jeremy535897 said:

You should have registered as self employed when you began this trade.

What is the technical definition of this 'trade' you refer to?  Is each thing I buy (bulk lot) and then sell (individually) a separate trade?  Or did my 'trade' start the first time I bought something and continues to this day?

Not really sure how to define this. 

There are also years where I don't bother, if I don't see anything I can be bothered to flip.  Does my 'trade' continue through these years also and I should just report it as zero income, zero expense on the self-employed section?

In the context of a tax return you do not think in terms of specific "trade", you think in terms of the concept of "trading". : You are "in business" (trading) for the purpose of making money for yourself. 
That could comprise:
-  a self employed consultant who sells their time at a price and makes a "living" from doing so, aka they are trading as a self employed consultant
- "traditional trader" business that buys physical goods and sells them to someone else for more than they paid to buy them. Obviously every sale is, in pedantic terms,  a separate trade, but not in the sense we use for tax return purposes. The totality of all your trades is what matters, your trade is: buyer and seller of goods  

both types of business have the intention of not losing money by spending more than they get from their activity, ie they are in business to make a profit

the definition of "trading" is thus that you undertake an activity with a view to making a profit 

the distinction in terms of where you report your profit on a tax return is based on the frequency of your activity:
- had you only ever sold the surplus 8 items you bought by accident then that was genuinely a one time only "other income"
- but you didn't, you deliberately set out to repeat the activity by seeking other goods to buy with a view to selling for a profit. As such you must declare it as trading income since it is the deliberate repetition which moves that income from "other" to being trading. The fact the money comes to you makes it self employed trading income. 

(yes there are situations where people repeatedly give stuff away at a loss / cost to themselves, but there are specific tax rules that cover that situation)

Once you are registered as self employed on tax return then you must continue to report your profit every year on your tax return, so yes, including those years where that is zero.
You carry on doing so until such time as you actively tick the box to say your SE has ended. Unless you tick that box HMRC may say your tax return is incomplete and has not been submitted on time leading to penalties.

Please educate yourself on your potential exposure to self employed national insurance, particularly the threshold above which it kicks in. Just because you pay NI on your job does not mean you won't also potentially pay NI on your SE income. Hence the very real risk of being done for tax evasion if you hide recurring trading activity under "other income" 

Where are you supposed to learn this stuff?  It was not covered in our Business Studies GCSE!

Should I get an accountant then?  Is there a specific type of accountant I need (given I already have to do a personal tax return)?

don't get me started on GCSE rather than proper exams

any reasonably intelligent person willing to spend some time educating themselves can learn it
alternatively you make take the view your time is more valuable so you pay an accountant to do it for you.
for such a simple situation as yours then a grunt level "high street" accountant is all you need, consult whatever passes for yellow pages these days to find one in your area,

to DIY then watch and learn from the SE webinars as they are pitched for the barely literate, but they are really rather good.
 
HMRC email updates, videos and webinars for Self Assessment - GOV.UK

HMRC email updates, videos, webinars and community forums - GOV.UK

if you subscribe you will regularly be sent the latest versions for whatever category you chose, the SE category is really quite comprehensive.

regency_man

TheSpectator said:

regency_man said:

I think I'm OK with the general cash accounting that's been mentioned... but I'd have had no idea about having to pay NI if my profits went over £6725.  

So in summary, I should start my 'business' from Apr 2023 by registering as self employed.  Do cash accounting, which for 23/24 is going to show as a overall loss due to the cameras bought and not sold so presumably I won't have to pay any tax on that?  Will the loss get me relief on my overall income tax then, including my PAYE job (essentially reducing my overall taxable income by the amount of the loss?)

Seriously, get an accountant to get you on your feet. You are so far out your depth here.

Literally getting conflicting advice here, one person says get an accountant, one person says it's not worth it for such small amounts.

Bookworm105

regency_man said:

TheSpectator said:

regency_man said:

I think I'm OK with the general cash accounting that's been mentioned... but I'd have had no idea about having to pay NI if my profits went over £6725.  

So in summary, I should start my 'business' from Apr 2023 by registering as self employed.  Do cash accounting, which for 23/24 is going to show as a overall loss due to the cameras bought and not sold so presumably I won't have to pay any tax on that?  Will the loss get me relief on my overall income tax then, including my PAYE job (essentially reducing my overall taxable income by the amount of the loss?)

Seriously, get an accountant to get you on your feet. You are so far out your depth here.

Literally getting conflicting advice here, one person says get an accountant, one person says it's not worth it for such small amounts.

as with all things in life, if you drip feed questions you get drip fed answers that may not coalesce into a consistent overall outcome.

the treatment of losses is the most technical area of accountancy, however, in your simple scenario you can answer your own question by learning from sources given. I'm not going to drip feed answers to questions you are only just discovering as there are yet more for you to find 

Nomunnofun1

regency_man said:

I think I'm OK with the general cash accounting that's been mentioned... but I'd have had no idea about having to pay NI if my profits went over £6725.  

So in summary, I should start my 'business' from Apr 2023 by registering as self employed.  Do cash accounting, which for 23/24 is going to show as a overall loss due to the cameras bought and not sold so presumably I won't have to pay any tax on that?  Will the loss get me relief on my overall income tax then, including my PAYE job (essentially reducing my overall taxable income by the amount of the loss?)

No - under the cash basis, as stated before, the loss can only be carried forward against profits from the same trade. 

DullGreyGuy

regency_man said:

TheSpectator said:

regency_man said:

I think I'm OK with the general cash accounting that's been mentioned... but I'd have had no idea about having to pay NI if my profits went over £6725.  

So in summary, I should start my 'business' from Apr 2023 by registering as self employed.  Do cash accounting, which for 23/24 is going to show as a overall loss due to the cameras bought and not sold so presumably I won't have to pay any tax on that?  Will the loss get me relief on my overall income tax then, including my PAYE job (essentially reducing my overall taxable income by the amount of the loss?)

Seriously, get an accountant to get you on your feet. You are so far out your depth here.

Literally getting conflicting advice here, one person says get an accountant, one person says it's not worth it for such small amounts.

It comes down to personal opinion and opinions can differ. You appear literate and sufficiently articulate that you would be capable of reading the guidance, at least now that you realise that you need to. Others think you are too far off course and so need a better/quicker founding that an accountant can probably give you. It certainly wouldn't hurt you to do so but it's a cost. 

If you'd messed up for much longer or bigger then an accountant could be useful for dealing with HMRC for you. Agents have different routes in and experience of dealing with them. When I accidentally paid my VAT money to the HMRC PAYE account, I emailed my accountant, they dealt with it and sent me an email saying it was sorted all in the time I was sitting in the queue to get through to HMRC. 

No one is stating you should be paying for full accountancy services for the rest of your life whilst the business is just doing £5k so its not a fundamental disagreement.

regency_man

You say drip-feed but I've literally revealed my entire business to you, I'm not hiding a big enterprise here, I just buy and sell things on a very occasional basis when I have time around my main job.  For 23/24 the only thing I bought was the cameras (£1200) and a coffee machine (£210).  I was able to sell the coffee machine for £50 profit (I was hoping for a lot more!) and the cameras as I've noted, didn't sell despite best efforts. This (current tax) year I've done a little better, I bought 20 memory cards for £115 and was able to sell them for £22 each so made £325 profit. I also bought some wireless access points for £230, but ended up giving them away to the Parish council as they needed to improve the internet connection in the Village Hall where I volunteer.  I think the cameras will eventually sell, I just need to find the right outlet for them as they are quite niche, it's a matter of finding the time though.

So, in review.  

- I cannot 'go back' and fix previous years so I'll just have to hope HMRC never decide to investigate my prior years where I reported my eBay income as 'other income' on my personal tax return.

- To be compliant for 23/24 onwards I should register as Self Employed

- In order to claim sideways relief (see I learned something new already!) against my income tax I need to use the accrual accounting basis.

So next steps, register as self-employed, learn about accrual accounting, submit 23/24 tax return.

Grumpy_chap

regency_man said:

What is the technical definition of this 'trade' you refer to?  Is each thing I buy (bulk lot) and then sell (individually) a separate trade?  Or did my 'trade' start the first time I bought something and continues to this day?

From what you have described in the thread, your "trade" is in buying job lots of stuff, splitting and then selling for a profit.  It makes little difference that the jobs lots of stuff might vary between one batch and the next - the "trade" (activity you do) remains constant - buy - split - sell - repeat.

If you then also took up painting and decorating that would be a different "trade".

And if you start mini-cabbing that would be a different "trade" yet again.

Painting and decorating or mini-cabbing are very different to buy - split - sell - repeat.

regency_man said:

Should I get an accountant then?  

Yes.

Bookworm105

regency_man said:

, learn about accrual accounting,

little tip then: 
debit entry on a balance sheet is a good thing but debit entry on the P&L is a bad thing
vice versa for credit entries