Tax, Small business and additional income - Advice/ Direction sought

[johnny778]

Thought I might tap in to the hive mind and see if anyone can help point me in the right direction.

Firstly, I’m not averse to paying for advice/ getting an accountant, I just don’t know where to start. Hoping someone on here might give me a starter for 10 that I can build on.

8 weeks ago I decided to have a dabble in reselling items on eBay. I focussed on one area and bought second hand items which were undervalued originally and then sold them on.

Fast forward 8 weeks and I have sold over 200 items and turned an initial £1.8k into a smidge over £7k. It’s gotten out of hand rather quickly and has shocked me at how quickly it built.

I know that the above attracts tax and that’s why I decided to pause things a couple of weeks back to try and evaluate what the best course of action is going forward.

I’ve been looking online and there seems to be many different options, sole trader/ Ltd company etc.

I’d like to continue as it’s been quite enjoyable and straight forward.

Im employed via PAYE and this income is in addition to my full time job.

Anyone else in here have a side line and if so, what is the best way to ring fence this and create some separation. I’m at a loss for What is the most efficient tax vehicle for something like the above?

[David_D]

Big question!

What would be helpful as a starter is to get some idea where your ambitions lie for your “side line”. Are you happy making a nice few thousand here and there or would you want to grow the business and maybe make it the next Amazon?!

Is it a relatively risk free business or do you have exposures from the goods you sell?

Any chance of making losses or is it predictable profit of one size or another?

Would your total earnings push you into higher rates of tax if you just go the self employed (not company) route?

Do you want to share the business with family or friends?

[A440]

I currently have a part-time PAYE job and a sideline gig. For my sideline I'm a self-employed sole trader and keep books for this. Once a year I send the books to my accountant and he works out my tax liabilities. I had been keeping books on excel spreadsheets, which was quite time consuming. So I've recently moved over to Quickbooks self-employed. So far, so good. I find it easy to use and it saves me time. My side-line is a fairly modest set-up, which is enjoyable and fun. If it seriously took off I'd consider creating a limited company I think. But at the moment being a sole trader works fine.

[johnny778]

Big question!

What would be helpful as a starter is to get some idea where your ambitions lie for your “side line”. Are you happy making a nice few thousand here and there or would you want to grow the business and maybe make it the next Amazon?!

Is it a relatively risk free business or do you have exposures from the goods you sell?

Any chance of making losses or is it predictable profit of one size or another?

Would your total earnings push you into higher rates of tax if you just go the self employed (not company) route?

Do you want to share the business with family or friends?

I have no desire for this to be my main job and I don’t want it to replace my job.

I started off thinking it would be nice to pay for a holiday and if I could do that each year I would be over the moon.

No exposure, all items are run of the mill and not technology etc. Supply of my items is readily available from multiple sources.

I suppose it’s relatively risk free because the worst case scenario is that I buy an item and I don’t make a return on it. Each item is low value in purchase price.

No chance of making losses other than writing off the normal things such as mileage/ vehicle use, printers for labels, packing materials etc.

I’ve been doing it with my wife who is a lower tax rate payer and I’m a higher rate payer of tax. My wife does the majority of the grunt work and I take the photos and source the items.

[DONGinsler]

Just discuss it with an accountant.

I created a business, applied for a name and wrote off certain things that ran the business, but as I was not a LTD or INC. Any money is considered personnel income.

Keep records of costs to deduct from profits. Mailing supplies and postal costs etc.

I wrote off whatever I could, but I went from part time to full time. Even part time you should be able to write off expenses

DON

[Ruggertech]

Enrol for self assessment with hmrc if you haven’t already.
Obviously fill in all your personal details, fill in your main employment details, including income and tax etc then look for the "any other income" section. Here put in your total ebay turnover and your total ebay expenses. In the box where it asks for details type in something along the lines of "My extra income was derived from ebay selling under the username .....". Then it calculates your tax liability at the end and you can pay the extra online.
That's it, no need for an accountant, sole trader or limited company status or any of that malarky. Takes an hour or two the first year then about 20 minutes each year after that assuming you have your figures to hand.

[aa388]

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[MB2]

I have no desire for this to be my main job and I don’t want it to replace my job.

I started off thinking it would be nice to pay for a holiday and if I could do that each year I would be over the moon.

No exposure, all items are run of the mill and not technology etc. Supply of my items is readily available from multiple sources.

I suppose it’s relatively risk free because the worst case scenario is that I buy an item and I don’t make a return on it. Each item is low value in purchase price.

No chance of making losses other than writing off the normal things such as mileage/ vehicle use, printers for labels, packing materials etc.

I’ve been doing it with my wife who is a lower tax rate payer and I’m a higher rate payer of tax. My wife does the majority of the grunt work and I take the photos and source the items.

I would suggest your wife runs the business and registers for SA as she is the lower rate tax payer ?

But yes - keep a simple P&L, expense everything you can related to it and then declare the additional income on your/her SA. Make sure you keep records now as be over a year before complete SA so gets confusing...

[deepreddave]

Depending on the facts and extent of your current role to date, the options are that you've been in partnership with your wife or one of you has been trading as a sole trader, with the other assisting in a paid or unpaid capacity. In terms of who is trading HMRC would look at who the customers thought they were trading with as an indicator ie in whose name are items bought and sold. Prima facia the simple route would be for your wife to be the trader going forward to fully utilise her basic rate band and to make pensions contributions if you stray into higher rate bands, assuming you can afford to do that.

One or both of you are trading though so it's definitely not 'other income' and whoever is trading needs to register for self assessment if they're not already (for tax and NIC purposes).

Whilst turnover isn't huge you can do your accounts yourself but an accountant will be <£500 and probably save you the bulk of that each year.

[David_D]

Here put in your total ebay turnover and your total ebay expenses. In the box where it asks for details type in something along the lines of "My extra income was derived from ebay selling under the username .....". Then it calculates your tax liability at the end and you can pay the extra online.
That's it, no need for an accountant,

Respectfully disagree!

[Ruggertech]

Respectfully disagree!

Could I ask why? It's worked for me for the last 8 years.

[Reeny]

Respectfully disagree!

With a modest self-employment income only (no PAYE), I have never had an accountant.
My tax returns are submitted as a single figure income, and single figure expenses since 2005 (17-years).
National insurance and income tax is checked & verified at the other end, then I pay my dues.

Keep receipts, and maintain records on excel or similar. That way you can back up any queries or potential investigations in future.
Once the Ebay activity income qualifies for VAT above £85k/year - then the problems will start.

[David_D]

Could I ask why? It's worked for me for the last 8 years.

As with any specialism, as a lay person, you (and I) don’t know what you (we) don’t know. When you say it’s worked for you, that’s (no disrespect) meaningless. You don’t know what you might have missed in terms of opportunities to manage things differently (better) and maybe, for example, claimed other legitimate business expenses such as business mileage and use of home facilities. Also, HMRC very rarely check anything so you don’t even have the comfort of their “sign off” of your returns, year on year. If they do eventually find something they disagree with, they can go back a good number of years.

Accountants do seem to have a PR problem unlike other professions. Most people don’t attempt to manage their legal or health affairs without reference to qualified professionals. To be fair, accountants are not helped by the TV adverts for accounting software which fail to mention the caveat about any software being only as good as the user!

[Ruggertech]

Thanks for that, a very concise answer. I believe claiming mileage, home use etc is more applicable to actual businesses?
Mine is simply buying antiques, curios, or items of clothing from auctions, charity shops etc, selling them on ebay or Facebook, and taking the price I paid, the postage, the packing and the ebay fees off the price I get and adding the total difference for the year. Its not even an ebay business account. Profit is at best a couple of hundred a month, a paying hobby in other words. So maybe an accountant could save me money, but a £500 accountancy fee would be a lot to make up from my very modest figures.
HMRC did spot check me a couple of years ago and were content with my explanation of my figures.

[David_D]

Thanks for that, a very concise answer. I believe claiming mileage, home use etc is more applicable to actual businesses?
Mine is simply buying an antique, curio, or item of clothing from auctions, charity shops etc, selling it on ebay or Facebook,

That is a business! Carrying out an activity for gain. You're subject to (and can take advantage of) the same basic tax rules as any business. Mileage to auctions and charity shops? Mileage to the Post Office (not many local ones these days!)?

Profit is at best a couple of hundred a month, a paying hobby in other words. So maybe an accountant could save me money, but a £500 accountancy fee would be a lot to make up from my very modest figures.

Fair enough. Be lying if I said that, at those levels, an accountant would save you more than their fee. There is a minimum accountants have to charge because of the regulatory overheads and hoops that need to be complied with.

HMRC did spot check me a couple of years ago and were content with my explanation of my figures.

HMRC won't tell you if you are paying too much tax!

[Ruggertech]

That is a business! Carrying out an activity for gain. You're subject to (and can take advantage of) the same basic tax rules as any business. Mileage to auctions and charity shops? Mileage to the Post Office (not many local ones these days!)?




Fair enough. Be lying if I said that, at those levels, an accountant would save you more than their fee. There is a minimum accountants have to charge because of the regulatory overheads and hoops that need to be complied with.



HMRC won't tell you if you are paying too much tax!

Yes, I know it is a business technically, but for me its a paying hobby..
I enjoy hunting out the items, owning them briefly, sometimes doing some light restoration or repairs before selling, and the small profits are beer and watch money. Its simple, and my accounts take me no more than an hour a month and even less than that to self assess. Maybe I could save more, but the simplicity works for me.

[Reeny]

On the upside - myself (like many people) have family and friends who work as accountants, and can advise accordingly.
No-one needs to pay £500 plus for basic advice.

If you can't "add-up" and submit a simple tax return, you should not be running a business.

[deepreddave]

Yes, I know it is a business technically, but for me its a paying hobby..

HMRC wouldn't be overly interested given the sums involved from what you've said but they definitely ought to have told you to complete a 'self employment' page, which wouldn't involve much more in your circumstances anyway.

More importantly, you suggested your practice in response to the OP whose business looks more substantial hence not at all appropriate for him.

In reality there's no penalty for incorrectly completing your tax return, only tax geared penalties for understating your liability but you run the risk of higher penalties if you do have extra tax to pay and either carelessly or knowingly completed your return incorrectly.

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[deepreddave]

No-one needs to pay £500 plus for basic advice.

If you can't "add-up" and submit a simple tax return, you should not be running a business.

I'd agree for someone with very straightforward tax affairs such as PAYE or a very minor self employment.. I referred to <£500 but the fees could be c£100 for just filing a simple return, more if you want business advice, accounts prepared properly and to pay the right amount of tax. A lot of "educated" people don't fully understand accounting/tax legislation hence why so many do use an accountant. It is optional but as has already been said one of the dangers is "you don't know what you don't know".

[Reeny]

For anyone in the same boat, the allowance for "Home-as-Office" and mileage allowance for work are as follows:
£26 per month = £312/year - Home as office https://www.gov.uk/simpler-income-ta...king-from-home
45p per mile car (24p motorbike) - use of own vehicle https://www.gov.uk/simpler-income-ta...nses/vehicles-

The grey areas for tax are items which are shared use, such as Broadband, mobile phone, laptop, digital camera, printer, consumables.
To keep it simple, make sure the work gear is completely separate to any items used for personal use - e.g. work camera / family camera.

[David_D]

A lot of "educated" people don't fully understand accounting/tax legislation hence why so many do use an accountant. It is optional but as has already been said one of the dangers is "you don't know what you don't know".

Indeed. There's obviously modest risk and opportunity on small scale and non-complex matters. Going back to the OP, it wasn't clear that the "side hustle" mightn't grow into something more significant and so a discussion with an accountant might be useful even if only to flag up opportunities and pitfalls if that happens.

There's a reason it takes years of training and experience to be a decent accountant - as with any other profession!

[markrlondon]

8 weeks ago I decided to have a dabble in reselling items on eBay. I focussed on one area and bought second hand items which were undervalued originally and then sold them on.

Fast forward 8 weeks and I have sold over 200 items and turned an initial £1.8k into a smidge over £7k. It’s gotten out of hand rather quickly and has shocked me at how quickly it built.

You're getting good advice in this thread so can I just say as an aside: Good grief, you've found the holy grail! I've never found anything which can easily be resold in that way, and I've certainly looked. I am most envious.