Which deductions (if any) before tax?

[Damian227]

I run a small sole trader business but the step from decorating to trading in goods online has added a few extra confusions to my tax return. I'll try put a basic idea below of where I'm just not 100% and hopefully somebody can help me out?

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Example:
Good Sold:
Item 1 - £5.74 (including 74p P&P)
[Gross Income - £5.74]

Cost Of Good Sold:
Item 1 - £1.00
[Gross Profit - £4.74]

Expenses:
Ebay Fees - 50p
PayPal Fees - 50p
Packaging - 20p
Postage - 74p
[Total Expenses - £1.94]

Net Profit - £2.80

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Now can anybody explain which part is taxed. Am I paying tax on total income (despite item cost and P&P being included in that?) Am I supposed to add the P&P to the Goods Cost section and then pay tax on what remains there? Or is the Net the taxable part after all my business expenses that went into the sale are deducted?

Really sorry for bothering people but it's a bit of a step from just taking 20% of my earnings as a decorator haha.

[Evan]

I'm not sure what forms, but generally in this example you'd be taxed on the 2.80 if you're looking at an income tax. If you're looking at a VAT, you'd be looking at charging it on the 5.00.

[Damian227]

Income tax was the culprit, as I'm not VAT registered due to the business being small and not earning above the VAT threshold anytime soon. Thank you very much. I didn't think it made much sense to take the previous numbers, as that is not the actual amount I'm making, but a friend thought it was likely that. I'll sort my tax return to your suggestion and my own assumption. If HMRC call me and tell me it's wrong, I'll simply retax it on the former and pay that. It seems silly to hire an accountant when I've done absolutely everything and just wasn't sure which one number to tax.

Thank you for the quick reply.