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With April and the start of a new UK Tax Year not far away, it may be worth considering the following if you are new to selling your bears ...
As far as I am aware, in the UK there is no such thing as a 'hobby business'. Selling bears, whether at cost or for profit, consitutes trading and trading means, by law, you need to register as a sole trader, with the Inland Revenue. I know, depressing eh? Anyway, a little word of advice for anyone new to bear selling is contact your IR office and ask them for the current information ... from what I recall, you will need to register within three months of making your first sale. Oh and trading is considered trading, no matter how few bears you sell.
It's not all doom and gloom of course, you will be entitled to your 'Personal Allowance', which means you are allowed to earn profits (which equates to your annual turnover (sales) less the cost of all your taxable expenditure) up to the PA limit (£5225.00 a year) without the need to pay tax ... that said, you will still have to declare your turnover (sales) each year, even if you make no profit at all. That's done by filling in a 'Self Assessment' Tax Return, which you can either do yourself, or get an accountant to complete for you. To be honest, it's pretty straightforward and unless your tax affairs are particularly complicated, you can probably manage to complete it yourself. The SA is sent out on the 6th April every year and these days, can even be submitted online (I like this option because it tells you straightaway what your tax liability is).
There is plenty of time to submit your SA when it arrives during April 2008 - those submitted by 30th September 2008 will receive an Inland Revenue assessment of tax liability and if they've had a profitable year, their tax payment for 2007/08 will be due no later than 31st January 2009. So, no need to panic!
The most important thing to do is KEEP ACCURATE RECORDS. File every receipt, invoice etc and log all outgoings and sales (if you're good on the computer a spreadsheet is great for this, or you can pop along to WH Smith, Rymans, Staples or similar and purchase a straightforward small business accounting book - If you're intimidated by such things, I can highly recommend WH Smiths 'Tax Tracker'. It's very simple to use and explains everything beautifully).
Let's face it, peace of mind is worth a little extra paperwork, don't you think?! :thumbsup:
If anyone would like to post rules on this thread to help new bear sellers understand their own country's tax requirements, please do!
Paula this is a really good post!! Especially as 'D'day is looming ever larger on the horizon...31st Jan aaaagh.
I do think it's easy to forget, (especially in the UK as absolutely no selling is allowed that the tax man doesn't know about) and before you know it you've racked up enough sales to owe some tax.
Things like terms and conditions are important too as trading standards paid my friend a call and told her in no uncertain terms that she had to get some done...or not trade. This again is different for every country but selling is a legal contract between us and the customer so we have to cover ourselves...for our protection as much as theirs.
I am determined that I am getting an online accounting system next year....do you have an accountant Paula? I have one and think I want to ditch him in favour of a proper accounting system that I do myself.
I'm pretty sure in the US, if you take money for something, you have to report it. Not that everyone does - but you are supposed to.
I do claim all my income. The plus side of that is I am also able to claim all my expenses against that income!
We do have a CPA - but he is not our accountant. I do all the bookkeeping for my biz (and hubby does for his own sideline biz too) but we go to our CPA to do our taxes. There are new rules and regulations every year which our CPA keeps up on. He only charges us $250 for everything and if there is an audit he will go in our place. Well worth his fee!
Great point about the Terms and Conditions Jenny! 
To answer your question I don't have a tax account, I've been doing my own tax for quite some time. Having said that, my other half is a Chartered Accountant, so these days I get him to cast his eagle eye over everything to make sure it all adds up properly before I submit. He has devised an excel spreadsheet which suits my needs perfectly, so that's how I keep everything recorded. It also really helps me to forward plan my finances as I know exactly how much profit I've earned each month and how much I need to earn in the coming months. Really useful.
The only thing I would say against doing the Self Assessment yourself, is that keeping abreast of all the relevant information regarding tax deductible expenditure and carrying losses forward etc can be tricky - it's easy to miss some of your entitlements. In my case, I'm quite likely to not claim for all of my deductibles simply because I don't always understand the nitty gritty of tax and so take a very simplistic straightforward approach to it, ie., if I'm not sure about something, I don't claim for it. However, I'm certain that what I pay in slightly more tax by doing the SA myself, is balanced by what an accountant would cost me.
omg
good call - i need to do mine ASAP !
im always last minute girl
thnaks for the reminder paula
i havnet had to pay tax yet, but you never know, one day !
cat xxx
...... In my case, I'm quite likely to not claim for all of my deductibles simply because I don't always understand the nitty gritty of tax and so take a very simplistic straightforward approach to it, ie., if I'm not sure about something, I don't claim for it.
You hit the nail on the head there Paula! I discovered I had missed a couple of thousand of deductions a year when I first went to my CPA. He was also able to amend my previous year's return (in which I had also missed $2,000) and so one year got back $4000! In my opinion, he paid for his services for life right there :crackup:
Hi All
I've taken the first step and got the form from Tax office. Sold my first bears on 21st November last year to an interior/teddy shop, so I'm alright time wise to apply. You have all given me inspiration to get on with it. :clap: :clap: :clap:
I was very surprised when the lady from the shop bought them straight away and has asked me to keep on making for her shop.
Thank you all, just keep on doing what you are doing. :hug: :hug: :hug:
Love Kayx
LuxembearsUgh. I hate tax time. ( but who loves it? 
) It's all very complicated, isn't it? Enough to make your head spin
We have a tax lawyer who does our taxes every year. There would be no way we could do it ourselves with our Dairy farm, land, and assets, my bear business and our medical expenses. The nice thing is that a lawyer knows every single loop holes and everything is kept legal.
YUCK...good luck with your taxes everyone.
Country BearsOooh I hate tax time too Judi!! I'd much rather be creating!! But, as they say, there's nought so sure as death and taxes!! Luckily I'm a book keeper (well for a little while longer before my break!!) so doing mine a a very much smaller version of works!! Thank heavens!! I have heard that even sellers on ebay were being randomly checked to see if they were declaring all they ought to be, I suspect a lot of people don't realise the implications of selling, even there. I doubt perhaps I would have done without knowing what I do because of what I do, and like it's already been mentioned, things change within the tax world all the time, it's so hard to keep track of. Roll on February!! :dance: :dance:
Well done Kay! You'll soon get the hang of things. 
Back Road BearsI'm the biggest dunderhead when it comes to taxes... I just don't "get" all the terms, depreciation on equipment calculations etc. nor am I good at bookkeeping throughout the year... just ALL of it. Our taxes were complicated enough before I started making bears. Worst thing is, hubs won't hire an accountant and I KNOW we are missing deductions and the government is benefitting from our ignorance and that steams me. I've already tried again this year to convince hubs we need to have someone who knows what they are doing do this but its a loosing battle. So tax time for me is a very sore subject and at least a month of headaches and marital spats.
Waggle BearsLaura Lynn, Daphne or any US artists:
I would appreciate your advice on the tax thing. I only sold 5 bears in November. My husband thinks I don't have to worry about reporting this income...up to $2,000 without reporting requirements. He suggests I just do this for a year and see where I am at that time before applying for a resale license or seriously keep receipts.
Your opinions on this. When did you start keeping complete records of the bears you sold and when did you apply for a resale licence, or did you?
Thanks.
FenBeary FolkOh Paula what a timely post
Like Claire, I am a book-keeper/account assistant, hope you don't mind I thought your comment to help with this aspect was spot on, so here are my little dittys, so to speak
The best phrase for accounts is "wholey and solely", if you can say something is wholey and solely for bear making then it is an expense, i.e. material, threads, stuffing, packaging, website fees, etc. If your answer is no it is for general use as well then a proportion of it can be put down a a business expense.
For example, I need a new camera, I have one already but it is not good enough, so for me the camera is being bought, wholey and solely for the business. Now if my computor broke and I was buying a new one, it would not be wholey and soley for the bears, hubby would surf ebay for motorbikes etc daughter would bebo her friends when she could get me off it and I would use it for bears, shopping, surfing, household finances etc, the percentage of time the computor was in use would be :hubby 5%, daughter 10%, ME 85% of which shopping 30% surfing 15%, household finances 5% and the rest 35% bears. Total of 100% but only 35% to bears so 35%of the cost of the new computor could be a bear business expense. Hope that makes sense :dance:
As for keeping records, the simpler the better, I keep mine on a simple spreadsheet, with a sales page, purchases page, stock page and finally made bears section, the more accurate records are the easier and cheaper it is, most small businesses incur bigger accountancy bills because the addition is wrong, it may the simplest thing to do but it is also the hardest to get right.
If anyone wants any help with spreadsheets etc I would be willing, but I don't want to step on toes 
One final thing, if you have a paid paye job (ie you are an employee), don't forget to enter that onto your tax return, if you make a loss this can be offset against tax paid in your 9to5 day jobs (a £700 loss is about a £100 tax rebate..............yummy, legitamite mohair buying )
Hope this helps Sue x
Really helpful and straightforwardly explained ... many thanks Sue!
Hi everyone,
Many thanks for the information Paula but, ... Oh boy, do I need help on this!!!! I am getting concerned about this! 
I only used to make a few bears a year but since an article on my bears in Teddy Bear Scene, things have somewhat changed and I think I probably need to start filling in a few forms! My problem is that I have always kept a sort of itemised list which is about five years in the making, but it is only one long list which shows everything from purchasing mohair, stuffing etc. to which bears have been sold. If I have to start doing Self Assessment forms, at what point on my long list of purchases and sales do I say "right, this is where I start from"??
If anyone can help me please regarding information on good spreadsheets or software packages which cover all eventualities, then I would be very grateful. Maybe I need a good piece of software to help me keep everything on track so can anyone recommend any? I am off to get some information tomorrow so thank you Paula for bringing this up, though I didn't sleep very much last night for thinking of it!!! It is bit of a worry but I suppose the only way to tackle it is head on!! I'm such a worrier!
Hugs
Marilyn
Past Time BearsLaura Lynn, Daphne or any US artists:
I would appreciate your advice on the tax thing. I only sold 5 bears in November. My husband thinks I don't have to worry about reporting this income...up to $2,000 without reporting requirements. He suggests I just do this for a year and see where I am at that time before applying for a resale license or seriously keep receipts.
Your opinions on this. When did you start keeping complete records of the bears you sold and when did you apply for a resale licence, or did you?
Thanks.
At the moment I decided to design my own bears and sell them was when I applied for my Sales and Use Tax Permit (which is what it's called in Texas). At that time, I also began saving receipts, recording expenditures and sales (divided into out-of-state and in-state), etc. Not until recent years have I ever had a profit 
, but it all gets reported, whether I have a profit or loss. I need to get going 'cause my state sales tax report is due January 20th - yikes.
Like Sue Ann, I also started right away. Even if you didn't make a lot of money, you still have your deductions and it can help with your taxes. We file 3 schedule C's (my biz, hubby's biz and daughter is subcontractor for her work)
Back Road BearsI was making bears very part time and my gross sales were around $1000-2000 per year for the first 3 years so I did not file taxes. I DID register my business name (Trade Name) with the state so no one else can use it right away.
Now, I have GREAT NEWS!!!! I hired myself an accountant today!!! I meet with her next week to discuss all the paperwork I'll have to have ready for her for both my business and our personal taxes. I haven't told hubby yet (though the bear industry now knows! Ha!) I must say I am SOOOO relieved! You have no idea! It had gotten so that from January to April taxes were like this huge black cloud following me EVERYWHERE! The stress headaches were unbearable! NO MORE OF THAT!!!
:dance: :dance: :dance:
Thank you, Paula for bringing this topic up and to those of you (especially Laura who made a great case) who use an accountant!!!
My new mantra:
I have an accountant.... life is good!
LuxembearsI'm glad we all feel the same way about taxes 
Marlys, When I first started my bear business I had to firstly register my biz name ( so the IRS can keep tabs---so to speak). According to our tax lawyer I was allowed to claim a loss for the first two years...... start up expenses etc. After that I could no longer file a loss. Now, this is not to say that it holds true today. Tax laws change so it may be different . My guess would be that since you only sold five bears for the whole year you might be alright but I would ask whoever does your taxes what the current laws are. It's best not to red=flag yourself. I have been audited before( before staring bears) and it is a nightmare.
I declare everything I make, and claim every possible thing I can that I spend on my business.
Anyone who works out of their home ( and I think we all do) can claim a certain percentage of electricity in your home. I think you have to have a workroom to do this. Since we all have to pay so much in taxes it's only fair for us to claim what are acceptable write-offs .....but Uncle Sam won't come out and hand it to you....you have to find out for yourself. It's complicated. Save and record everything , then hire someone who knows really really well what they are doing. It's worth it.
FenBeary FolkDaphne, I didn't want to push the accountant thingy, but well done you, if anything a good accountant will give you a good nights sleep :hug: Most will explain what you need to do to keep their bill down, ie how to keep your records, if they don't then maybe they are not right for you, that doesn't mean that accountants will be funny if you just turn up with a tesco/wallmart carrier bag (those clients are my speciality) but you will pay more
Judi, I'm not sure about the US but in the UK, claiming for electric etc is a very grey area, certainly if you have a workroom that is solely for bear making then a small proprtion can be claimed, I would stop short of claiming any thing like proportions of council tax etc, if you just have a corner of a room and make bears watching the tv, as I do, I don't claim electric, this is because, the room would be lit, heated etc wether I was making bears or not, hope that makes sense
Marilyn........Don't panic, if you have 5 years worth of details, I really do think an accountant would be the best, you don't say wether it is your only job, if it is then your personal allowance each year probably will have been enough to cover any profit made, in cases like this I really do think an accountant would be best to advise you on what to do with the past years, you probably will have to submit tax returns for those past years. If you would like I can PM you a copy of my spread which will show you how to put expenses into catagories etc, as for starting 6th April 2007 is the start of the current tax year to 5th April 2008
Choosing an Accountant, can be very tricky, like builders there are dodgy ones about, and often you don't know they are not good enough till the taxman comes knocking. So here are a few tips
1 Ask around, whose happy with whom, different people get on with different accountants
2 Make a short list of 3, like builders getting 3 quotes is essential, then make appointmants with all of them
3 Take a years worth of receipts with you, that way an accountant can see how much work is invovled
4 Don't be put off if they can only give you an estimate, it is very difficult to guess how much it is going to cost
5 Ask how you can help yourself, if they are helpful, then they have your best interests at heart
6 GUT INSTINCT, the most important, do you feel comfortable, are they making you feel at ease
Hope some of this helps :hug:
Great advice coming through here!
With the beginning of the new tax year starting on 6th April, I think it's a great time for anyone who hasn't previously organised themselves, to begin. I think Sue's advice is very helpful regarding anyone who hasn't been accounting for tax purposes and has a back log of things to deal with and in that situation, I think I would definitely seek further advice from a tax accountant, for peace of mind if nothing else. Having said that, we should all keep sensible records and in my experience sensible really doesn't have to be overly detailed.
Basically you need somewhere to record everything. So if you can get hold of a small business accounts book that will do the job. The TAX TRACKER book from WH Smiths is ideal for first timers because it makes everything really clear. It's very easy to follow - the most important thing is that you set yourselves up with a system for logging all your financial information. So, my suggestion would be the following:
1. Buy a Tax Tracker or equivalent. (Alternatively, set up a spreadsheet, but to do this, it's helpful to have the accounts book so you know which categories you need to record on the spreadsheet)
2. Invest in an A4 ringbinder file and a packet of A4 clear wallets with punch holes.
3. Clearly mark the top right hand corner of 12 of the clear wallets with one of the twelve months of the year from April - March.
4. Every time you are given a receipt/invoice for bear business expenditure file first log it in the Tax Tracker and then file it in the relevant month's clear wallet of your ringbinder. I like to do this on a daily basis, that way nothing gets forgotten.
5. Every time you are paid for a bear, enter the total amount in your 'sales' column of your Tax Tracker. I also issue an invoice and keep a copy for each sale, recording the date, customer's contact details, details of their purchase and the total amount paid.
And that's about it! Once you get into the swing of it, it will become second nature!
Record keeping really is an essential part of selling bears and on top of maintaining your legal obligations, it's also a really good way to see how your business is progressing financially. It helps with pricing, planning ... in fact, every aspect of running a bear business, because everything should come down to how you make your finances work successfully when you are selling a product.
Finally, a word of caution! Sound financial record planning is essential when you start a business. Please don't ever think you will slip under the tax radar because you are only turning over small amounts of money. The Tax Man does audit teddy bear businesses ... I speak from personal experience. If your records are accurate it's an unpleasant experience, which tends to drag on a bit and can cause no end of administrative headaches, but if everything is in order, you will be able to face such things confidently.
FenBeary FolkThank you Paula for the compliment, you are too kind :hug:
You are also the bearer of very sound advice yourself :hug: , I do my accounts just like you but on a spreadsheet, I do have an expensive sage-like package I could use but, at the moment, my business is too small. The tax tracker certainly sounds great.
I also agree, the taxman will find out, they are notorious for it, but they do tend to be kinder to those that come forward and confess, so to speak, or so I am led to believe.
Here's another little tip
Unusual expenses- credit card interest
The dreaded credit card, a must some will say. If you are an angel and pay your balance every month then this is not for you. If not the read on.
If like me you muddle along, occasionally you have to use the dreaded credit card. Just recently I found that there was a mohair sale right before xmas. I couldn't afford it right this minute but did not want to miss out, so I decide to use my visa. Now if I do not pay the balance, I will be charged interest. Is this claimable as an expens? Yes, but it is can be really difficult to calculate which portion of interest just belongs to the mohair, so for me the best way was to assign one small credit card to my bear making :crackup: , I decided not to put anything householdy or beautywise on that card, so all the interest incurred can be claimed, as it all be for bear making (NB payment protection is not tax deductable), as long as, only the interest on the bear making/ tools/equipment etc is claimed, then I am ok (that is why I decided to have a separate card just for bear making)
Please do not think that I am encouraging credit card use but we have all been at a fair and seen those gorgeous stands, with their seductive alpaca's and we have all reached for the visa. By keeping a card just for bear making, it keeps it separate, simple and easy, controlable. Hope that makes sense lunch time you know
:pray: Please, I do hope I am not teaching grannies to suck eggs, if I am, I am truely sorry
Hello all, I'm sorry to say I've just forced myself to read all your scary writings: I hate the word 'tax', but I need some help!
I just sold my first Sloth as a profit to myself, so I guess now I need to start tninknig about this a bit more... only thing is, I don't know if I'm now recording for the next year or for this one, and I don't know if my being a student in ful time education counts for anything, and I don't ever expect my earnings to go over £5000, so!
Can anyone help me? Sorry to be such a pain!
Pumpkin & Pickle BearsIt's great that you've brought this up Paula to make people more aware. My business is registered and I filled out my first SA form in September......I only made £67 something in profit!!! LOL. I know this year's one will work out differently though as I don't seem to have bought as much supplies a 2006/start of 2007 and my bears seem to have become more and more popular since April last year!!
People have said to me before 'why do you bother registering your business and declaring such a small profit - nobody would ever know'....hmm, well, I'm a bit too honest for that I'm afraid....probably something to do with being the daughter of a policeman!
....hmm, well, I'm a bit too honest for that I'm afraid....probably something to do with being the daughter of a policeman!
LOL Gemma!!! Me too!!! :crackup:
