Amanda-O'Brien-eBay What You Need to Know About Tax
What You Need to Know About Tax
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It’s strange how sometimes I get asked the same questions over and over during the same week - and this week everyone wants to know about tax!
Yes, it’s ‘Tax Return’ time again, so I thought I’d use today’s newsletter to give you a few tips on the subject.
I also want to tell you about an interesting new feature available on eBay.com – it won’t help your sales but it’s an interesting bit of information nonetheless – more on that in a moment…
First though, four little letters that can make your heart beat a little bit faster…
HMRC… what you should know about tax
I often get asked what is required tax-wise when you set up a business and you’ll be pleased to know that it is actually fairly straight-forward. It’s little surprise that with so many businesses now trading on eBay that HM Revenue and Customs (HMRC) have published a proper guide for e-traders, so all the information required is online and easily accessible.
What is a little more confusing is whether you should register as a self-employed trader or not. So, for clarity:
If, you buy goods to resell (even in small amounts), if you make items to sell, if you buy and sell goods for other people and earn a commission or you provide a service for a payment, then you are trading as a business and you must register with HMRC.
You should register during your first three months of trading, so there is a little leeway, but you must tell them that you are a self-employed trader.
You’ll also need to sort out your National Insurance Contributions and be aware of the information you need to keep records of each month for tax purposes.
HMRC are very aware that a huge amount of eBay businesses operate and they already carry out spot checks so it’s important that you take this seriously and keep things legal and up to date. Remember, eBay is totally transparent – it is not difficult to find out what, when and how much of something you are selling. So, my advice is to do it by the book!
There are a few simple rules that you must follow:
- Register with HMRC within 3 months of starting to trade. Find out how to do that here.
- Arrange to pay your National Insurance contributions. Find out how to do that here.
- If you expect your annual turnover to exceed the threshold for VAT (currently approximately £73,000), you must register for VAT. Find out how to do that here.
- Your profit from your business will be treated as personal income, so you will have to complete a self-assessment tax return. But don’t worry: if your turnover is below £15,000 per year, you only need to complete a few lines on the self-assessment form: your total income, your total allowable expenses, and your profit. Find out more information on this here.
- As a self-employed sole trader you won’t need to register with Companies House so don’t worry about that!
So, to keep things simple, you must also make sure that you keep records of all your transactions – that’s stock purchases, equipment such as computers, cameras, printers etc., packaging materials and postage costs and of course any other money spent. Plus keep a track of money coming in too! This is simple – just keep every single receipt and jot everything down so that you know what’s what.
It is unlikely that you will need an accountant during the early stages – you should be able to manage your accounts on your own for the first few months and I can recommend a brilliant website that is extremely eBay and PayPal friendly to help you with this. It’s called Outright and can be found here: http://www.outright.com - definitely worth a look.
Also, because tax implications will vary from business to business, I strongly advise that you go to the HMRC website and have a read through some of the guides available on the site as this will help you with your own situation.
For starters, go to http://www.hmrc.gov.uk/startingup/ and scroll to the bottom of the page, then click on SE1 – Thinking of working for yourself? beneath the Further Information heading.
Okay, so that’s the financial stuff out of the way. Now on to a bit of light relief for a Friday! There are a couple of new features over on eBay.com that haven’t migrated to the UK site yet. They are both situated on the Seller Dashboard but you can’t access them unless you log into the .com site. That’s easy enough though, just go to http://www.ebay.com and log in with your usual ID and password.
Now, neither of these new features will actually improve your sales or get more traffic to your listings, however the information is quite interesting to look at which is why I thought I’d mention it today.
See your lifetime’s work so far…
The first new feature is called ‘Lifetime Transactions’ and it’s pretty much what it says on the tin. You can view your total lifetime sales for your eBay account!
These appear as the number of sales and also in monetary value which is quite fascinating. Plus you can also see the date of your very first eBay sale on that ID – so you can have a little reminisce whilst you are at it!
The other new feature concerns ‘actions that eBay have taken to protect your account’ that’s a bit of a mouthful but you’ll see it shortened to ‘Seller Protection Actions’ on your Dashboard.
What this actually is, is the number of feedbacks eBay have removed for you – none in my case - the number of opened buyer protection cases that eBay have removed or don’t count any more on your account – again none in my case - and the number of times an unpaid item credit has been applied to your account – that’s 6 in my case, which I thought seemed very low as I am certain I have had more buyers who haven’t paid than that!
Anyway, at the moment I don’t know if the UK site will be adding these features to your Dashboard or not, but of course you can still access them easily enough by logging into the .com site!
by Amanda O'Brien
Online Trading Expert
Amanda O’Brien is an extremely successful online trader specialising in eBay, Amazon Marketplace and niche sales websites. You can sign up for her free weekly eletter here:
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