DSF

Hello everyone

I'm running a small custom DS online shop. With the growth it's getting now I'm expecting it to make about £950 in sales. Is this income taxed? It has been making just enough to keep everything running and then a tiny bit of profit, but with current growth it'll be making more profit soon. If it is taxed, will I pay tax on all the income from sales or just on profit? This tax calculator says it would put my overall income into the higher tax band, which I don't particularly want to be in. Hope to get a reply soon

Cheers
HM

Are you asking about VAT or income tax? VAT, I cannot say but if this is a "side job" to your full time work then it should be added to your yearly income and taxed accordingly.

HMontes;130726 wrote:Hello everyone

I'm running a small custom DS online shop. With the growth it's getting now I'm expecting it to make about £950 in sales. Is this income taxed? It has been making just enough to keep everything running and then a tiny bit of profit, but with current growth it'll be making more profit soon. If it is taxed, will I pay tax on all the income from sales or just on profit? This tax calculator says it would put my overall income into the higher tax band, which I don't particularly want to be in. Hope to get a reply soon

Cheers
HM

You pay tax on profits after cost of sales and other allowable expenses have been deducted. As for personal tax bands, you pay a certain rate for taxable income up to that figure eg 30,000 taxable income, first £11,000 ish personal non taxable allowance so tax due at 20% for income upto £25,000 (for arguments sake dont know the figures exactly) 20% of £14,000 = £2,800 then tax on income of higher tax band 30% ( arguments sake again) 30% of £5,000 = £1,500 so total tax payable is £2,800 + £ 1,500 = £4,300. You will have National Insurance contributions on top of these too.

This is just to show how it works in principle you dont pay 30% tax on the full £30,000 ie £9,000. However talk to a qualified accountant for exact and up to date information.

Just to complicate matters a bit further .....

It is not clear from your post whether the £960 figure is per week, per month or per year.

You would normally pay income tax on your profit (not sales) and, as you seem to have a regular income from other employment, you will already be paying tax at 20% on earnings over the personal allowance which from April 6 will be £11,850. If adding your profits to your wage pushes you over the higher rate threshold, which from April 6 will be £46,350, then you will pay 40% just on the amount over £46,350.

Note you can claim an allowance of £4.00 per week against "home office" expenses without producing any documentation to support it. If you want to do the paperwork then you may be able to claim a higher amount.

If your sales (not profit) exceed £85,000 per 12 month period, then you must register for VAT. This means you can claim back the VAT you pay out but must charge VAT on (taxable) sales. If you are selling to other VAT registered customers then it may be worthwhile registering even at a lower figure. If you are selling to the public then try and avoid it as it will dent your profits.

On the other hand, if you are a micro business and the £960 sales figure is per year, then you are under the £1,000 sales (not profit) threshold the Government introduced

and do not need to eit her register with HMRC or pay any tax on the micro profits.

There you go ---------- Clear as mud! :biggrin:

I think StellaD answers very well.

In the short term, keep EVERY possible reciept, and a record of your sales however made or paid for.

At some point you should register your business with HMR&C - and then do some sums (accounts)to show if you have made any profit.
This goes into a 'self assessment' form at the end of the year, and tax due calculated. Since you have a regular job, all your self employed 'profit' will be taxable at your nominal highest rate.

There will be better forums to help answer this type of small business question

My son is an accountant - I could ask the question if you like

this post is nearly 4 years old ....