Starting out as a reseller: bank account, insurance and saving for tax

A bank account for the business

As a sole trader you don't legally need a business bank account. That's only required for set-ups like limited companies. But HMRC expects your records to show which money is business and which is personal, and that's much easier when sales come into one account and stock is bought from it.

You can sometimes run a small business through a personal account, but check with your bank first: not every personal account allows business use. If yours does, a second personal account used only for selling keeps things separate without a business account.

Insurance: what's required and what's sensible

For a one-person reselling business, the law only requires two kinds of cover:

• Motor insurance that covers business use, if you use a vehicle for the business. That includes your own car. Driving to a car boot to buy stock or to the post office with parcels is business use, and a standard social and commuting policy may not cover it.
• Employers' liability insurance, but only once someone works for you.

Beyond that, insurance is your choice, but two things are worth doing. Tell your home insurer you're working from home and keeping stock there, because a home policy might not pay out for business stock or a business-related claim if they don't know. And remember that as a sole trader you're personally responsible for the business's debts, so think about whether your stock is worth insuring in its own right.

Saving for tax

Nobody takes tax off your sales for you, so it's on you to keep some back. On profit above the £12,570 Personal Allowance, a basic rate taxpayer pays 20% Income Tax plus 6% Class 4 National Insurance. That's 26p in every pound of profit.

If a job already uses your Personal Allowance, that 26% applies from your first pound of reselling profit. Moving a quarter of each payout into a separate pot is a simple habit that covers it, and the habit matters more in your first year, when payments on account can make the first January bill bigger than you'd expect.

Records from day one

Write down what every item cost and where it came from on the day you buy it. It's the record people most often wish they'd kept, because stock is usually your biggest expense and you can't claim what you can't show. The expenses guide covers what else to keep.

Your starting checklist

1. Decide which account the business money goes through.
2. Check your car insurance covers business use, if you drive for stock or post.
3. Tell your home insurer about stock and working from home.
4. Start recording costs and sales from your first item.
5. Set up a pot for tax and move money into it as sales pay out.
6. Once you're over £1,000 of sales in a tax year, register for Self Assessment.
7. Switch your selling accounts to business accounts: here's why.

Where STC fits in

Recording from day one is what STC is for: add an item with its cost and source when you buy it, and everything after that, from listing to payment, builds on it. The Tax screen keeps a running total for the tax year, so you always know roughly what to have set aside.