New to business tax just a simple question

I know I sound like scratched record but, an hour with an accountant may prove very beneficial/cost effective when setting up.

Also, if you're looking at help, including webinars courses, these aren't bad as an introduction to running a business and the tax implications;

https://www.gov.uk/government/collections/hmrc-webinars-email-alerts-and-videos

ergot2005 wrote: »

I'll at some point be talking to an accountant for sure.

Market rate is around the 10 pound mark the ingredients pot and labels come to a staggering £1 plus sales tax leaves me with 8pound

Of course website hosting costs
Domain name
Postage
And all of the other boring things eats away at the 8 pounds profit...... I was not really sure how yo calculate a monthly cost into my unit costs

For now the company manufacturing will be run from home until I outgrow myself with volume or product verify

What do you mean by sales tax?

The 19% you mention in the first post, sounds as if it is corporation tax which is paid on the profits of a company after allowable expenses are deducted. You don't take it off your sales revenue. In the first year of setting a company you could well make a loss as you pay setup costs for equipment e.g. cooker, packaging machine, compliance etc.

If you are talking about VAT, assuming you are VAT registered than that is different and then you will also be looking at taking off the VAT you pay on vatable items used in the production ingredients.

If for example let's say you could sell £20,000 a year of product, which is roughly around 40 products a week. Then you would not need to be VAT registered so there is no VAT element to worry about (turnover would have to go over £85,000 to have to register)

Here is a very rough calculation, in terms of costs you mention

Revenue: 20,000
Production Costs: -2,000
Postage: -2,000 (this could be a lot more if heavy items)
Website&Design: -1,000
Insurance: -500
Accountant: -500
Equipment: -2000
Energy: -500
Misc: -1000

Total Profit: £10,500

The next bit depends on whether you are a sole trader or a limited company.

As a sole trader you have to pay National Insurance on profits which used one of the online calcs would be around £30 a month. If you had no other jobs and the full personal tax allowance available to you then you pay no tax. So your take home pay could be around £10,140 or so.

A limited company is slightly different in that you would pay yourself a wage and dividends and in this case you would end up with a salary of around the same amount as your net with the company paying some NI. As that salary and NI would be equivalent to the £10,500 then again there would be no corporation (19%) tax to pay.

If you made a lot more money then the sums would be clearly different and the different between a Ltd company and sole trader can differ. The more you earn the potential of a limited company been more beneficial.