Confused and 100% Undecided

[Trader86 1]

Hi All,

 

I have registered as a sole trader in Mar 19. Starting selling cars from home while working however got hold of premises last month and my portable office is being delivered next week. I now accept Cards and offer warranties. 
my plan is to quit my £35k / year managers job and go “cars only” from April. Nit handed my notice as yet, as I am undecided.  I have some knowledge about cars but not knowledge about running this business. I admit. but no one knew at their very beginning I guess. Financial year is coming to the end and I have looked at my invoices and profits etc... Yeap I will be absolutely molested by Tax man. But its ok. I’ll declare it all and pay what I owe. I am not VAT registered at this stage as didn’t meet or exceeded the threshold. I will however need to register IF go ahead with my plan, as I don’t want to be dealing with £300 X reg Mondeos.. 

I am averaging pre-tax profit at around 300-500 per car (after expenses) and can see myself selling about 4-5 cars a week. Is this sufficient earning to sustain in this business? 
 

Can someone please please explain how much tax will I need to pay on a following example.

Vauxhall Corsa purchased for £1500

expenses: transport £70, valeting 20, mechanical work/service: 150

 Sold for: £2200

will any of the expenses above bring my taxable amount down or is it simply the £700 Difference I will pay tax for?

whats the tax percentage? 20%?

£2500 office I am about to buy, will this be knocked off my profits?

I invested 10k to start with, will this count in my turnover? 

Last one, but a big one.. I got scammed on a car I have recently purchased. It was bought from another dealer using stolen card then I purchased it from them. Vehicle has been recovered off my drive and confiscated by Police (literally) during its sale. I lost £6000 + expenses. Will this be taken into account in terms off losses when it comes to paying tax? 

Any genuine help and advice would be highly appreciated. 
 

Thank you

  

 

 

 

 

[MattR 177]

7 minutes ago, Trader86 said:

Hi All,

 

I have registered as a sole trader in Mar 19. Starting selling cars from home while working however got hold of premises last month and my portable office is being delivered next week. I now accept Cards and offer warranties. 
my plan is to quit my £35k / year managers job and go “cars only” from April. Nit handed my notice as yet, as I am undecided.  I have some knowledge about cars but not knowledge about running this business. I admit. but no one knew at their very beginning I guess. Financial year is coming to the end and I have looked at my invoices and profits etc... Yeap I will be absolutely molested by Tax man. But its ok. I’ll declare it all and pay what I owe. I am not VAT registered at this stage as didn’t meet or exceeded the threshold. I will however need to register IF go ahead with my plan, as I don’t want to be dealing with £300 X reg Mondeos.. 

I am averaging pre-tax profit at around 300-500 per car (after expenses) and can see myself selling about 4-5 cars a week. Is this sufficient earning to sustain in this business? 
 

Can someone please please explain how much tax will I need to pay on a following example.

Vauxhall Corsa purchased for £1500

expenses: transport £70, valeting 20, mechanical work/service: 150

 Sold for: £2200

will any of the expenses above bring my taxable amount down or is it simply the £700 Difference I will pay tax for?

whats the tax percentage? 20%?

£2500 office I am about to buy, will this be knocked off my profits?

I invested 10k to start with, will this count in my turnover? 

Last one, but a big one.. I got scammed on a car I have recently purchased. It was bought from another dealer using stolen card then I purchased it from them. Vehicle has been recovered off my drive and confiscated by Police (literally) during its sale. I lost £6000 + expenses. Will this be taken into account in terms off losses when it comes to paying tax? 

Any genuine help and advice would be highly appreciated. 
 

Thank you

  

 

 

 

 

Sensible Intro!

Re the tax question on the Corsa - you pay tax on everything at the end of the tax year, not the individual car. If you mean VAT, yes, its 20% of the margin between sale and purchase, so buy for 1500, sell for 2200, VAT payable on 700 = £116.67.

your tax is payable on all profit, less your annual allowance (which you will currently be using via your job). The cosst of your office, and the 6k loss are legitimate business expenses so will reduce your tax bill.

Only you will know if you can make this pay by leaving your job. Is your objective to earn more than the 35k you currently make? Or is it a lifestyle choice? And how many cars could you buy today with cash you currently have? to sell 4-5 a week you will need at least a stock of 20.

[Trader86 1]

Thanks Matt. 
Well clarified. 

Do I need to keep hold of receipts for fuel, repairs etc ? or is it pointless from a  TAX point of view  

I currently have 7-8 cars. And I purchase all of them on eBay and sell via Autotrader. I have not tried auctions yet. It might be a weird way to source my stock but it somehow works. I have not tried auctions yet. I am very skeptical about the fact that “big boys” will simply overbid me every time as they have lot of cash ready and they can sell it with better packages from their nice forcourts with better overall service - for more money. Their prep standards definitely exceed mine too. 
I will probably need to break this psychological barrier... 

Its both money and lifestyle but mainly money driven with an idea to expand to 40-50 cars in 5 years time. 

[David Horgan 564]

Hi 

Welcome aboard .

You have to keep receipts for a min of 6 years for HMRC tax purposes , you will need them for VAT purposes too to work out the VAT , You will need them for end of yr accounts also .

Auctions are source of cars for sure , I find it simple to use them but I have no concept of fear at all buying cars . They can be intimidating places for the start ups and there is a lot to learn regarding Vendors , costs etc . 

As you move ahead with premise and VAT plus your wage you may find 40/50 cars a stretch to attain as money evaporates at start up level for a year or two , plus storing cleaning servicing and selling that amount of cars + storage costs will require staff and that's a whole new problem to pay for . 

You have to find that sweet spot of what you can manage regards numbers and expenses of people . 20 is a good number as a guide . 

The after expense profits £300/£500  are a slight concern to my way of thinking , but I cant comment as you don't mention age /type or price of stock sold . 

I do though wish all the very best in your new venture , 

Just remember this , Its what your EARN and not what you TURN that's the difference between succeeding and not .

Its great fun though if your thick skinned , hard headed, brave ,and  don't mind working 18/20 hour shifts 7 days a week  tha'ts a joke really its only 15 hours 

 

[justina3 518]

When you say you have "registered as a sole trader" registered with who ? if your going to get molested by the tax man i am wondering how you missed the vat man, I would read up on the vat rules make sure you dont fall fowl of them.

[Trader86 1]

Justina3 - will my current job earning counts towards the 80k VAT threshold for this year?

[Mark101 536]

24 minutes ago, Trader86 said:

Justina3 - will my current job earning counts towards the 80k VAT threshold for this year?

No - it's the turnover from your business, nothing to do with income. Unless of course, you're self employed and the business is linked?

[trade vet 702]

21 minutes ago, Trader86 said:

Justina3 - will my current job earning counts towards the 80k VAT threshold for this year?

When you pack in your day job, you will have to work very hard and be lucky to replicate what you are now earning in total.Could you also just re explain how you were scammed.Who did you buy it from,did you do an HPI check etc.

[justina3 518]

I assume you have selected an accountant i would go spend an hour with them and give them all your pay slips p60 ect they will need this to complete your sa302 for this years sales anyway and seek there advise, whilst asking on a public forum is often handy for someone to give you a plan ahead without knowing all the in and outs of your situation is almost impossible.

There is also a guide you can download from this forum which covers most of these questions.

Looking at your plan to scale up to 4-5 cars a week thats a lot of work you will no doubt need to employ staff 2 if not more people and there in lays your next hurdle.

[Mark101 536]

26 minutes ago, justina3 said:

Looking at your plan to scale up to 4-5 cars a week thats a lot of work you will no doubt need to employ staff 2 if not more people and there in lays your next hurdle.

As a 1 man band, you have zero chance of doing 20 cars per month, there is simply not enough man hours in a day, especially if you do the job properly:

MOT

Service

Cosmetic Repairs

Valet

All pre sale.

I am on for 12 this month between 2 of us and to achieve 12, we are entertaining 30+ visitors in the month (only work 5 days per week). On Friday, we had 1 customers pop back for a tiny  job, 4 walk-ins, 1 appointment, 2 cars for MOT and another for Service plus 3 cars to prep, photograph and advertise.

[Trader86 1]

48 minutes ago, Mark101 said:

No - it's the turnover from your business, nothing to do with income. Unless of course, you're self employed and the business is linked?

No, totally different job. I work as a warehouse manager. 

53 minutes ago, trade vet said:

When you pack in your day job, you will have to work very hard and be lucky to replicate what you are now earning in total.Could you also just re explain how you were scammed.Who did you buy it from,did you do an HPI check etc.

Thats one of the reasons why I started to be skeptical about the whole concept of my business...  
Car was listed on eBay as Buy it now. 
I hit the button expecting it to be write off as it came from a certain city which I found to be a mother of all Categorized vehicles. I don’t deal with any Cats but I thought to myself that for that much money surely there will be a 4 digit figure profit.
Did the HPI - clear, which was surprising.  
Collected it, paid for it and lost it in less than week time.. (once proving I am not a suspect they are looking for but rather a victim) I was told by police that it was purchased with stolen credit card and within few hrs then sold to me. 
 

[justina3 518]

14 minutes ago, Mark101 said:

As a 1 man band, you have zero chance of doing 20 cars per month, there is simply not enough man hours in a day, especially if you do the job properly:

MOT

Service

Cosmetic Repairs

Valet

All pre sale.

I am on for 12 this month between 2 of us and to achieve 12, we are entertaining 30+ visitors in the month (only work 5 days per week). On Friday, we had 1 customers pop back for a tiny  job, 4 walk-ins, 1 appointment, 2 cars for MOT and another for Service plus 3 cars to prep, photograph and advertise.

plus to sell 20 you would a steady source of stock in flow no way you could source them all from ebay so off to auctions it would be and then your swimming with sharks and there just the auction houses, £1500 value cars you can add £250-400 fees and delivery doesnt leave a lot for your £300 -500 margin.

It sounds as if we are all a grumpy bunch of gits, which you would be right but i am just trying to highlight some of the issues You will come across you havent even started to think about yet. 

As tv mentioned if you can run your job and maybe do the odd one here and there to build up some extra income, that has got to have an appeal. 

Your opening comment we all started somewhere was true, but for most of us it was days of hardly no internet no cra rules one or two local suppliers for cars with an add in the evening post every thursday to sell stock, things are a lot harder these days.

[Trader86 1]

20 minutes ago, Mark101 said:

As a 1 man band, you have zero chance of doing 20 cars per month, there is simply not enough man hours in a day, especially if you do the job properly:

MOT

Service

Cosmetic Repairs

Valet

All pre sale.

I am on for 12 this month between 2 of us and to achieve 12, we are entertaining 30+ visitors in the month (only work 5 days per week). On Friday, we had 1 customers pop back for a tiny  job, 4 walk-ins, 1 appointment, 2 cars for MOT and another for Service plus 3 cars to prep, photograph and advertise.

I only presumed so as I managed to sell 4 last week with only 7 cars listed. But thanks for heads up. 

[trade vet 702]

20 minutes ago, Trader86 said:

No, totally different job. I work as a warehouse manager. 

Thats one of the reasons why I started to be skeptical about the whole concept of my business...  
Car was listed on eBay as Buy it now. 
I hit the button expecting it to be write off as it came from a certain city which I found to be a mother of all Categorized vehicles. I don’t deal with any Cats but I thought to myself that for that much money surely there will be a 4 digit figure profit.
Did the HPI - clear, which was surprising.  
Collected it, paid for it and lost it in less than week time.. (once proving I am not a suspect they are looking for but rather a victim) I was told by police that it was purchased with stolen credit card and within few hrs then sold to me. 
 

So it was a private seller whose name and address would not be on the reg doc.If so,that is a big own goal and I think for the moment you should stick with your day job.

[Trader86 1]

5 minutes ago, justina3 said:

plus to sell 20 you would a steady source of stock in flow no way you could source them all from ebay so off to auctions it would be and then your swimming with sharks and there just the auction houses, £1500 value cars you can add £250-400 fees and delivery doesnt leave a lot for your £300 -500 margin.

It sounds as if we are all a grumpy bunch of gits, which you would be right but i am just trying to highlight some of the issues You will come across you havent even started to think about yet. 

As tv mentioned if you can run your job and maybe do the odd one here and there to build up some extra income, that has got to have an appeal. 

Your opening comment we all started somewhere was true, but for most of us it was days of hardly no internet no cra rules one or two local suppliers for cars with an add in the evening post every thursday to sell stock, things are a lot harder these days.

Mark101 - great comment. 

I am trying to stay realistic here and I know you guys learned the business for years and years and probably went through few heavy losses that only contributed to your success, but then if I don’t try I will never know.

I have been saving for this journey for years and managed to get around £30k but this does not seem to be enough to have a solid clean start..

And yes being on my own with people around me having absolutely NO CLUE about business and cars is not helping either. And I considered partnership too, but finding someone with a clear goal is lot more difficult than I thought...

just that level of uncertainty is unreal.. with family and mortgage still at a back of your mind..

[David Horgan 564]

5 minutes ago, Trader86 said:

I only presumed so as I managed to sell 4 last week with only 7 cars listed. But thanks for heads up.

If you sold 4 out 7 its not going to be a weekly occurrence is the first thing . The other worry is if you sold 4 out 7 in a week then your too cheap and not earning enough to sustain a business, there will be lots of hidden costs to running a full time business ,   £300/to £500 wont pay the bills , servicing , repairs , rent , MOT , petrol costs , delivery costs , valet costs , insurance costs , trade plates , electric bills , advertising bills , internet bills , water bills , accountant bills , VAT bills , bills like  , printers , pressure washers , waxes , cleaners , carpet cleaners , see where this is going cant you , bills that mean nothing now all of a sudden become huge costs and they are weekly /monthly costs .

Project your profits that you think you may make and at best HALF them to put in reality . 

[Trader86 1]

5 minutes ago, trade vet said:

So it was a private seller whose name and address would not be on the reg doc.If so,that is a big own goal and I think for the moment you should stick with your day job.

I genuinely can’t see this 1 mistake being a yes or no factor. It took a while but I got over it. 

2 minutes ago, David Horgan said:

If you sold 4 out 7 its not going to be a weekly occurrence is the first thing . The other worry is if you sold 4 out 7 in a week then your too cheap and not earning enough to sustain a business, there will be lots of hidden costs to running a full time business ,   £300/to £500 wont pay the bills , servicing , repairs , rent , MOT , petrol costs , delivery costs , valet costs , insurance costs , trade plates , electric bills , advertising bills , internet bills , water bills , accountant bills , VAT bills , bills like  , printers , pressure washers , waxes , cleaners , carpet cleaners , see where this is going cant you , bills that mean nothing now all of a sudden become huge costs and they are weekly /monthly costs .

Project your profits that you think you may make and at best HALF them to put in reality . 

Those are the cars I managed to sell last week:

I already pay: trade insurance, trade plates, rent, valeting, card machine charges. 

F Focus Auto - 1350/2000

T Yaris Auto 900/1800

T Yaris Auto 1600/2000

P 508 Auto 2600/3200

N Micra Auto: 1250/1600

normally sell about 1 a week, but that week just went really well. I had 7 or 8 cars listed. So I presumed selling similar amount while having 20 cars on my premises going forward.. 

[New year revolutions...... 197]

I would respectfully suggest you keep the full time job for another year whilst still trading part time,this job is very down at the moment and we leave the eu proper in dec,more concerning is due to the flu virus  there is a possibility simple parts required to get a car ready for retail may become unavailable in the months to come,keep workingbuild up as large a nest egg as you can and reap praise next year if I was u

[Trader86 1]

Thank you all for your advises, I have genuinely taken them into consideration.

I will post back here in couple of weeks and let you know the decision I made in terms of business/ work. 

[trade vet 702]

53 minutes ago, Trader86 said:

I genuinely can’t see this 1 mistake being a yes or no factor. It took a while but I got over it. 

Those are the cars I managed to sell last week:

I already pay: trade insurance, trade plates, rent, valeting, card machine charges. 

F Focus Auto - 1350/2000

T Yaris Auto 900/1800

T Yaris Auto 1600/2000

P 508 Auto 2600/3200

N Micra Auto: 1250/1600

normally sell about 1 a week, but that week just went really well. I had 7 or 8 cars listed. So I presumed selling similar amount while having 20 cars on my premises going forward.. 

I am sorry but when you set up as a bonafide trader with premises selling stuff like this you will find that your customers attitude will change from what you have been used to.You will need to factor in that you can expect a lot of comebacks and refund claims under CRA 15 which you will have to resolve.Also don’t be impressed with dealers appearing to do well unless you can see their previous 2 years trading accounts.I have lost count of the number of new big time dealers who have imploded as quickly as they arrived having taken on too much.Making money in this job is not easy but getting ahead is even harder.

[Arfur Dealy 823]

4 hours ago, Trader86 said:

Hi All,

 

I have registered as a sole trader in Mar 19. Starting selling cars from home while working however got hold of premises last month and my portable office is being delivered next week. I now accept Cards and offer warranties. 
my plan is to quit my £35k / year managers job and go “cars only” from April. Nit handed my notice as yet, as I am undecided.  I have some knowledge about cars but not knowledge about running this business. I admit. but no one knew at their very beginning I guess. Financial year is coming to the end and I have looked at my invoices and profits etc... Yeap I will be absolutely molested by Tax man. But its ok. I’ll declare it all and pay what I owe. I am not VAT registered at this stage as didn’t meet or exceeded the threshold. I will however need to register IF go ahead with my plan, as I don’t want to be dealing with £300 X reg Mondeos.. 

I am averaging pre-tax profit at around 300-500 per car (after expenses) and can see myself selling about 4-5 cars a week. Is this sufficient earning to sustain in this business? 
 

Can someone please please explain how much tax will I need to pay on a following example.

Vauxhall Corsa purchased for £1500

expenses: transport £70, valeting 20, mechanical work/service: 150

 Sold for: £2200

will any of the expenses above bring my taxable amount down or is it simply the £700 Difference I will pay tax for?

whats the tax percentage? 20%?

£2500 office I am about to buy, will this be knocked off my profits?

I invested 10k to start with, will this count in my turnover? 

Last one, but a big one.. I got scammed on a car I have recently purchased. It was bought from another dealer using stolen card then I purchased it from them. Vehicle has been recovered off my drive and confiscated by Police (literally) during its sale. I lost £6000 + expenses. Will this be taken into account in terms off losses when it comes to paying tax? 

Any genuine help and advice would be highly appreciated. 
 

Thank you

  

 

 

 

 

Welcome.

If you've got the confidence and determination to make it happen, you will do, its all in your mind, you have to have the right attitude...I couldn't image anything more boring than being a warehouse manager (no offence). Making money for yourself is a mindset and its hard work, but its worth every penny ..

How much cash do you have to invest in the business ?    

[Halfpenny 114]

Not wishing to sound negative but the OP wants to give up the day job and admits to not knowing much about business or cars....   and then goes on to ask some pretty basic questions.

Really, I think you are far from ready to enter this job full time. You need to do a lot more research. The world doesn't need another failed kerbside trader.

I am semi-retired now after decades in the trade. I think that things are going to go the way of retailing in general - small outlets are being squeezed and closing in favour of big outlets (think supermarkets vs. high street grocers or butchers).  The future for the small trader is probably in niche and specialisation - classics, 'Automatics R Us' or Hybrids imported from Japan.  Working alone flogging a few cars a week and living hand to mouth is not going to be much fun.

Moreover I think its going to get tough later this year. I know lots of people won't agree with me but I think Brexit (which doesn't truthfully happen until start of 2021) is going to hit the motor industry hard. 

[justina3 518]

1 hour ago, Trader86 said:

I genuinely can’t see this 1 mistake being a yes or no factor. It took a while but I got over it. 

Those are the cars I managed to sell last week:

I already pay: trade insurance, trade plates, rent, valeting, card machine charges. 

F Focus Auto - 1350/2000

T Yaris Auto 900/1800

T Yaris Auto 1600/2000

P 508 Auto 2600/3200

N Micra Auto: 1250/1600

normally sell about 1 a week, but that week just went really well. I had 7 or 8 cars listed. So I presumed selling similar amount while having 20 cars on my premises going forward.. 

even if you sell one a week you seem to average a retail price of £2000ish that in itself would take you over the vat limit 

[Warley 0]

Thanks for asking the original question trader. I'm in almost exactly the same position as you but with less experience re sales on the board.  I'm a mechanic though with a specialisation in landrovers so was hoping to supplement sales income with servicing and repairs to landys in a country town. The comments have been very sobering and useful. I'm off to my first auction on Monday and will be trying not to look like a newbie. Hope to be buying on the Tuesday. (Early Range rover sport and mini clubman).

Thanks again. This site is a great resource. 

[Trader86 1]

I am well below, I had gaps. Month here month there.