Calculating tax - vintage resale business

ruby2sday · 20 July 2018 at 9:09AM

Hi, it’s my first year of business and I’m trying to get my head around how i’ll pay tax and what information I’ll need. I’m a sole trader. I was originally under the impression that all stock I bought, goods for resale, would be counted as expenses, but from what I’m reading online it seems that I can only count the cost of what I have actually sold. Is that correct? If so, I’ve no idea how to calculate the cost of each individual item, as I buy clothes by the kilo, around 15 kilos a time. Also my receipt just has the kilo amount and the cost, so nothing to prove how many garments I actually bought. I have a rough estimate of what I pay per garment on average but that I can’t obviously use a guestimate for tax purposes. Any advice on what I can do / how this works?

Pennywise · 20 July 2018 at 11:04AM

There are two options.

Accruals (standard) basis means you only claim the costs of what you actually sell, when you sell it.

Cash basis means you claim the costs as you buy, regardless as to when you sell them.

The choice is yours, but there are pros and cons of each option which you need to research as there's more to it than the purchase of stock, such as tax relief on buying equipment, loss relief, monies owed/oweing at each year end all treated differently under each basis.

If you're unsure, you'd be best to ask your accountant.

ruby2sday · 20 July 2018 at 11:42AM

Thanks, I will research cash basis as I would definitely like to claim as I buy. I don’t have an accountant as it’s only a small business I can’t really afford one.

ruby2sday · 20 July 2018 at 11:52AM

This is what I read about cash basis: “However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases.
What this means is that you can only deduct the cost of the inventory when you sell it, not when you purchase it.” !!!129300;

ruby2sday · 20 July 2018 at 11:54AM

Does having stock that is yet to be sold, on an online store, count as an inventory that is necessary to my income? I!!!8217;m guessing yes?

Calculating tax - vintage resale business

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