Paying Tax on Selling a product

bigbadcon

Hi folks,

Im wondering if someone can confirm that im thinking the right way about the below..

Please correct me if im wrong on any of the figures as im fairly clueless when it comes to tax.

I currently have a full time job as an employee in a company.
I earn roughly 43k so im assuming that im paying €36,400 @ 20%, Balance @ 41%.

I am starting to sell a product now in my spare time.

Lets say the product is being sold for €100 and its costing me €50 to produce.

Do I have to pay tax of 41% on the €50 profit im making?

If so is there a better way of doing it where I can pay less tax?

Thanks for your help..

exaisle

You have to pay 41% tax on the profit you're making....plus 5% PRSI...plus the Income levy.

Sorry to be the bearer of bad news!

misspiggy40

Don't forget that you can take the expenses you incur in selling that item off the €50 profit first. So it is on your net profit not your gross profit. So the business proportion of your car expenses, phone expenses, postage/delivery, whatever your expenses for that product are, comes off the €50 first.

bigbadcon

Ouch

Thanks for the replies.

misspiggy40 wrote: »

Don't forget that you can take the expenses you incur in selling that item off the €50 profit first. So it is on your net profit not your gross profit. So the business proportion of your car expenses, phone expenses, postage/delivery, whatever your expenses for that product are, comes off the €50 first.

So am I right in saying..

€100 - (€50 to produce product + Other Expenses) = Amount I pay tax on.

So is a sole trader what I should be looking into?

misspiggy40

Yes your example is correct. Selling price - (cost plus expenses). Bear in mind the expenses you claim must be solely related to this enterprise.

Just based on what you have said I would go down the sole trader route. Fill in Form TR1 I think to register as self employed....downloaded from revenues website....post again if you have any issues there.

For your year end you will fill in form 11E most likely.(Form 11 is longer) This form shows your sales and expenses and also has a section for your paye income. Let us say you begin to sell your product this year, you need to return Form 11E by 31st Oct 2010.

Buy a cheap accounts package or if you are a computer whizz set up a spreadsheet for yourself and all the figures you need will come straight back to you. Also if you do decide to go self employed, don't forget to register for ROS as it makes everything very easy.

Finally, sorry if I am stating the obvious, but your paye work goes on exactly as before. Your self employment does not effect it. It is up to you to put all your figures together on the 11E to work out your final tax bill.

Hope this helps and the very best of luck.;)

bigbadcon

Thanks very much misspiggy40.

That was all the information I needed explained in lay mans terms.

I really appreciate it.

bigbadcon