Accounting, tax, stock... I'm confused!

[alisonellerbrook0]

Ok, so I've been going over 6 months now and I want to get on top of my tax situation before I'm hit with the self assessment for and subsequently a bill!

I know it should be simple enough to work out my profit - turnover minus expenses should equal profit.
But where does my stock come into it all? Does it count as an expense or will I be taxed on the stock I have?

I buy raw materials which I turn into my home accessories, I have recently bought a lot of fabric which I have not yet sold, is the value of this what I bought it for or what I could sell it for once I've turned it into a lampshade?

I find the whole situation very confusing, if it's a tax deductable expense then I have not made much profit, but if not then I will be due to owe a lot more in tax.

...also, do I only start paying tax on my profit once I have exceeded by tax code amount?

Boy I hate finances!

[captainadventure]

The raw materials which you purchase and then use to make your products are deductible as a cost of sales and are therefore deductible before tax, as are the majority of expenses although some can be misleading.

If you look at the sample Profit & Loss account on the website below you should be able to calculate a rough figure for your profit to this date as a guide for any forecasting requirements.

http://www.bizhelp24.com/accounting/profit_&_loss_account.shtml

Obviously get a professional to do your end of year accounts to make sure they're absolutely correct, don't want the taxman sniffing around!!!!

Hope this helps!

P.S Raw materials are included at cost.

[alisonellerbrook0]

Thanks Rob, I see I can deduct the cost of the stock that equates to the sales I've made and all stock leftover goes down as Stock on the balance sheet (so I guess this isn't something I'm taxed on).

I think a professional is a VERY good idea for the year end!

[captainadventure]

Yeah, sorry, didn't explain that as well as i thought i did.

Expenses incurred in producing the actual goods sold are deductible as a cost of sales, ie. raw materials, direct wages etc.

All other stock remaining, whether finished goods or raw materials, are recorded in the balance sheet and do not affect the tax calculation.

As long as you keep good records and check your calculations on a regular basis you shouldn't have any nasty shocks from the taxman!