Starting an eBay Shop - Legal Requirements

[CWA]

Hi guys, here is my situation.. I am looking to sell some stuff (which i will be producing myself) on eBay to make some extra cash. I realise that as I am selling to make a profit, i should register on eBay as a business user, and that I should also declare my commercial tradings to the Inland Revenue/HMRC(?)

The thing is I will be going to university by the time I intend to start this trading, and i may also hold a part-time job, and so when I am registering with HMRC, can i still declare that I am self-employed? Even though I will still be employed by another person, and also a student?

I also intend to sell the products on eBay using an eBay Shop, and would like to make up a name to trade under that I can name the shop, when I am declaring my trading to HMRC, can I register with this trading name even though I will not be an actual Company, just a sole trader?

Finally, where would I stand in terms of paying income tax? Would i need to file tax returns, or is that only if i am turning over �2500 a year?

Sorry for the length of question, and I hope this is worded well enough for you to understand!

Thanks in advance

[Ethel]

You can call your business whatever you like - on your tax return you wil be CWA trading as....
Limited company names are registered but trading names aren't. Do a quick search on google and ebay to make sure your chosen name isn't already used.
Check the name you want isn't being used by a limited company here:
http://wck2.companieshouse.gov.uk/3a6a19bfb174 1abf318e9972b660ec54/wcframe?name=accessCompan yInfo

You will have to fill out a tax return each year and pay income tax if you have made enough money. Even if you make a loss you have to fill out those forms. Don't forget that income from other sources, such as paid employment, is also taken into account as far as your tax free personal allowance is concerned.

You can hold down a full time job, a part time job and have as many businesses as you like. If you do not have paid employment you will have to pay NI contributions yourself, �2.30 per week at Class 2, and Class 4 if you make over �5435.

From the very start keep records of every penny you spend on your business, and every penny you earn. Keep the receipts.

Make sure you understand the law. If you are trading on eBay you will be subject to the Distance Selling Regulations if you sell on the Buy It Now formats, but not if you sell in the auction format. Make sure you fully understand your obligations under the DSR.
You will also be subject to the Sale of Goods Act so make sure your goods are as described, fit for the purpose and of reasonable quality.


You must tell the Inland Revenue of your self employed status within three months of the start up, or you will be fined.
Keep on top of your record keeping.

[CWA]

Thanks Ethel for the detailed response, it's just the info I needed!

I just need a few clarifications though, you said "You will have to fill out a tax return each year and pay income tax if you have made enough money". Does this mean just money that my business made or money my business made and money i have earned through a full/part time job aswell? If it is just money made by the business, is it based on the turnover or profit made? And if it is based on what I earn along with what my business makes, is still my tax free personal allowance figure that must be exceeded?

And also, if i am earning above the tax free personal allowance (and paying PAYE and NIC) before i start the business and continue with that job when i start running the business, is it just income tax i will be charged for where the business is concerned?
Sorry if these seem like silly questions, but I still don't really understand everything about tax and stuff lol

[Ethel]

If you have a job, your tax from those earnings will be by Pay As You Ean (PAYE) - you will receive your wage after the tax and national insurance has been paid assuming you earn over �124.52 per week (from April).

You pay tax on your business profits, not turnover. So you buy an item for �10, sell it for �20, that is �10 profit less your listing fees, final value fees, PayPal fees. Don't forget postage and packing costs too. Hopefully you will cover your actual postage costs only, but if you make a profit on that you add that too. So hopefully your profit will be �6 - and this is the amount you pay tax on.

When you come to fill in your forms it will be more straight forward than you think. I think you are worrying needlessly.

You have one tax free allowance - �6475 per year from April. If you earn �7000 in your part time job, your allowance has gone and you pay tax on every penny your business makes. If you earn �4000 in your job, you will be able to make a profit of �2475 before you pay tax from your business.

Don't worry too much about it now - just remember to register yourself as trading within 3 months of starting up, and keep all those receipts.
Buy a good pair of scales and weigh the item with appropriate wrapping before you list it - you need to know how much to charge for postage. Don't forget to add 72p for 'signed for' postage. Keep all postage receipts.
If you haven't got a good camera you must buy one - good photos are essential.
Don't forget to keep the receipts for your scales and camera - this will be offset against your income.

[Ethel]

You might find this useful:

http://www.hmrc.gov.uk/selfemployed/iwtregiste r-as-self-employed.htm

[CWA]

Yeh lol I am quite a worrier :P

Just a few more things, you know i cannot register as trading with HMRC before i have actually started trading.. well I want to open up a seperate business bank account to base my businesses PayPal account on.. can I just set up an account and name it as the name i want to trade with? Even though I am not actually registered with a trading name etc?

Thanks for the all the advice so far by the way :D

[Ethel]

You can continue to use your existing account, but you can open a new account with the name cwa trading as xyz.

Be aware that most banks charge for business accounts, although many do offer a free period.

It's a long time since I needed to set up any accounts though, so this is a useful guide:
http://www.bizhelp24.com/accounting/opening-a- small-business-bank-account-5.html

I would not bother with opening a bank account until your business is more established. You will only be accepting payment through PayPal which can be transferred to your existing account.