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What do I need to do, tax wise, when I'm running an eBay business? |
I want to set up an eBay business with one or two friends. I don't really get what I have to do with taxes or anything and now I've just read about some employers thing. I don't get what I have to do, could sombody explain? (I've not done any of this tax stuff before, so please make it an idiots guide) Just keep track of all of your sales, and at the end of the year claim them as ordinary income. It shouldn't be hard, just set aside around 25% of your income for tax purpose... Also remember if its less than $10,000... The IRS will never find out... So if that happens just keep that 25% and put it back into your business. Good luck! Everything you need to know is here - in reasonably simple language, too: http://www.hmrc.gov.uk/findout/index.htm... Note that it specifically mentions ebay sellers. internet transactions unless they stay in YOUR state (if they have a state sales tax that is) are NOT taxed period end of story. Congress is out to change it but who knows. That is if you live in the US elsewhere it whatever that particular country decides. if you visit the local tax office they will give you all the info you will require that's how it is done no other way then you will know you are sending your TR in correctly These folk are very friendly and helpful Ok there are a number of points to address here. First of all you mention an ebay business so I assume you will be buying things to resell on ebay with a view to profit.? (You are probably aware that just selling your personal chattels will not necessarily be a taxable activity) Assuming you are running this as a business exactly what is the relationship with your friends? Are they partners (i.e. they will share in the profits) or will you just buy things from them to sell on? If you are partners then you are all self-employed. If they just do as you tell them and you pay them a wage, keeping all the profits to yourself then it is only you that is self-employed and your friends are employees. In any event as you will be running a business you must notify HMRC within three months of starting the business. This is done by completing form CWF1 (obtainable from www.hmrc.gov.uk ) which achieves two things. First you will be registered within the self-assessment tax system and will receive returns each year. Secondly, you will be paying class 2 national insurance though you can claim exemption from this if your earnings are likely to be small. If your friends are to be employees then you will need to register as an employer but I doubt this will apply in your case. Let me have more details if you think this could be a problem. The only other thing you need to be aware of is VAT. I don't know how fast you expect your business to grow but you should be doing a calculation at the end of every month. This involves calculating your taxable turnover for the previous twelve months (or from the start of business if shorter) and if this is higher than the registration limit (currently 拢61,000) then you will need to register. Post more details if you require further information. You only have to declare a 'business' that you run with a view to making a profit. Any part-time hobby, just for fun, that covers its expenses is exempt. If you hope to run your ebay business to make money, the rules are the same as for any other business and you should take professional advice before you start. If you structure the business so that you are the sole trader, then any payments you make to your friends for services rendered are wages and you have to operate PAYE as an employer, however, if they will only be supplying items for you to sell on their behalf, I suggest you just take commission from them. like ebay does, and include this in your taxable income. Alternatively, you can setup apartnership between you and agree what percentage of the profits you should each have. When you have decided whether you are a sole trader or a partnership, you need to notify the Revenue and Customs within three months of starting, on a form CWF1, which you can download from their website. They will then arrange for you to pay Class 2 national insurance contributions and send you a tax return at the year end to report your profits on. Terms: Turnover is the name for the money you receive from sales Expenditure is anything you have to spend to achieve the sales. This includes the amount you bought the sale items for, the ebay fees, postage, the cost of your internet connection etc... Profit is Turnover less Expenditure. Again, I can't re-iterate often enough - Get professional advice if it's going to be more than a few pounds a week. Anne The Tax lady www.taxlady.co.uk www.hmrc.gov.uk |
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