Part time start up

[Nick 2]

Hi, Ok so I have a full time job but want more income and I'm very interested in selling used cars from home. I have £10000 capital. Ive sorted trade insurance quotes, ready for a trade account at Manheim, been to a couple of auctions. (profit margins look quite good) Looked into trade plates etc. So I think i'm starting to understand the business. (tell me if i'm wrong : ) BUT i'm a bit confused with VAT, tax and NI. So in need of some advice, I'm only looking to sell 1 maybe 2 cars a month so not needing to be VAT registered. So the bottom line question is......Will I have to pay 20% VAT, 20% TAX and 9% NI on cars I sell? So basically half of my profits. I would only buy VAT margin cars from the auctions. So basicly is there any money to be made if I have to pay 50% of my profit to the government? Or am I wrong?

For example

Car bought for - £10000

Sold for £12000

Profit £2000 - Vat on the £2000 = £400 -Tax on the £2000 = £400 and the 9% NI on taxable profit... So profit would then be £1092?  Is this correct?

 I'm not registered as a sole trader yet.

Any advice appreciated,

Thanks,

Nick.

[Max Branning 149]

You wouldnt need to register for vat until your turnover exceeds 80k a year so i wouldnt worry about that to start with as it wont affect you.

You would basically have to pay any income tax on any END OF YEAR profits not per car. For example you may lose some money a car which wipes out a profit that you made on another one. At the end of year you would need to do a self asessment for your motor income and would pay tax accordingly. Depending on what your income is from your full time job bear in mind you could be pushed into the higher tax bracket 40%.

Always a good idea to speak to an accountant and get things set up right from the outset.

Oh and please dont expect to be making £2000 profit per car...After all expenses even £500 is hopeful these days !

Good luck.

[SC Derby 259]

VAT on £2000 profit works out at £333.33, not £400.

Every little helps.

[Nick 2]

Thanks for the advice guys. Firstly I know there is not likely to be a 2000 grand profit on a car, just easier to do the maths : ) 

Also how come vat would only be £333 not £400 on £2000 if vat is 20% I thought it would be £400?

I'm friendly with our account at work so will have a chat with him tomorrow. 

Last thing is..... Why does the government make it so bloody hard for people to make a living!! 20% tax!! 20% vat plus NI charged at 9% so in total 49% to them. Have I got this right? A yes or no will do unless more complicated. I am aware I can claim back certain things but nothing like what I'd lose on profits. 

Cheers. 

[SC Derby 259]

Because it's worked backwards effectively, on every £1,000 margin you will pay £166.67 VAT

 

Which is effectively £833.33 + VAT

ie 833.33x1.2=1000.

 

 

[Max Branning 149]

Thanks for the advice guys. Firstly I know there is not likely to be a 2000 grand profit on a car, just easier to do the maths : ) 

Also how come vat would only be £333 not £400 on £2000 if vat is 20% I thought it would be £400?

I'm friendly with our account at work so will have a chat with him tomorrow. 

Last thing is..... Why does the government make it so bloody hard for people to make a living!! 20% tax!! 20% vat plus NI charged at 9% so in total 49% to them. Have I got this right? A yes or no will do unless more complicated. I am aware I can claim back certain things but nothing like what I'd lose on profits. 

Cheers. 

No. 

[SC Derby 259]

Worry about making any money before you think about tax lol.

TBH from set up to the first time you will be due to pay any corporation tax will be about 2 years, IF you make any money