At what point do I become a business liable for taxes?

Question

Well, basically, I've sold a couple of computers on eBay recently, a couple I made up from spare odds and sods I had lying about, a couple I made from ordering a few spare parts in. Obviously I'm making a bit of money from it.

Now, I'm generating quite a bit of interest in my computers, because they're reasonably priced, it's getting to the point where it's hard juggling it with my day job. What I want to know is, at what point do I stop being a private trader selling a few bits and pieces to becoming a proper trader who has to pay taxes on his profits?

I, like most people, don't particularly want to pay taxes, but I don't want to get stung by the Inland Revenue either. If business takes off, it's inevitable I will have to pay business taxes, but at what point?

Thanks for all your replies - stitched up, I've sold a handful of computers and made about £500 profit over the course of about 4 months - I don't think I'm taking away the bread and butter of other traders!

Answer 1

The point at which you become a business is when you start building these computers with a view to making a profit. It is the motive that is important although it is an unwritten rule that HMRC will assume it is still a hobby if your turnover is less than £800 a year.

Note that was turnover, not profit. Anything above that and you need to have your reasons for it still being a hobby ready to trot out when challenged.

Ebay listings are examined regularly with a view to tracing businesses which are not declaring their income. You are probably still under the radar but I wouldn't let the business grow much more without declaring it.

Answer 2

you can ring up the inland revenue and declare that you are running a business and they will set up a tax account for you and you will have to fill out a tax return every year and then any tax that you r liable for will be deducted from your income. I think that if ur full time job earned you £20k and then u made £5k on ur computer stuff, you would be taxed on £25k, not sure, better check. The tax office will have all the info you need.

Answer 3

Now for a sensible reply.
First of all, do you have other income - do you have a day job? if so, then all the profit you make on Ebay will be liable to tax at 22% minimum. You need to register with HMRC as self employed as soon as possible and you will need to self assess at the end of each tax year.
If however, this is your only income, you only need to register with HMRC once your profit brings you over the tax free allowance of £5225 in the current year.
Note that in calculating your profit, you need to take into account all your overheads - not just the cost of the computer parts, but the postage to customers, Ebay's commission, tolls, use of your home, etc.

Answer 4

HM Revenues & Customs have guidelines for what is classed as trading and what needs to be declared called "A guide for people who sell items online, through classified advertisements and at car boot sales" this is their only guidance so far for ebay sellers.
to start off with look at these examples to see if you are trading and liable for tax/VAT http://www.hmrc.gov.uk/guidance/selling/examples.htm then see the left hand side of the page if you need further advice from them.
i know it might be tempting to keep things on the quiet (which some answers have also suggested!) but please do things by the book and declare anything you should do. there can be huge implications for tax evasion now-a-days and it's easier than ever for people to suggest the name of someone they think is doing it - it would only take one of your buyers to report you and you'd be in deep waters!!

Answer 5

Technically you should be doing it now. But if all you are doing is a few computers a year and the money does not put a big blip on your income, you don't really need to worry. However, if you start getting more serious, income stream becomes greater, and especially if you start doing websites or more advanced means of drumming up business, then you should get serious.

Answer 6

You should probably be paying tax now, you are reasonably priced because you don't pay tax on it, but you are also taking away the bread and butter of your local legitimate traders.

Answer 7

First, get yourself a good accountant for advice and the proper way of doing things!

Answer 8

Which one of these attorneys are you going to call when you get that letter from the tax man?

Answer 9

Just keep it (and your money) to yourself mate! The taxman steals enough of our hard earned cash without taking money from us which we earn from the comform of our computer desks.

Answer 10

don't worry bruv keep 25% in a savings account from every purchase and wait until the slags tell you they want it you will earn money on your money and its their if you need it its all about planning if they don't happy days