I wrote a long and detailed response, but then I found this article that does it much better than I did
Just a couple of things I’ve found out after 14 or so years of doing it:
If you owe any tax you can have it put into your tax code for the following year and pay it via your normal monthly deductions from your job or if you want to keep it separate (which I do) you can pay it as a lump sum by the end of the tax year (so if for example if completed a return this year it would need to be paid by 31st January 2017). There’s a box you have to tick for that at the end of the return - don’t do what I did and miss it, it took some sorting out to put that mistake right and I never did it again
The final thing is - you’ll be taxed on the amount of profit you make as HMRC assume you’ll put this profit straight into your pocket. I found it was years before I could actually take the money I’d paid tax on, because I needed to keep the money in the business to pay for new stock. Serious word of caution - make sure you keep proper accounts for income and outgoings and learn what counts as legitimate expenditure - then you can make sure you’re genuinely only paying tax on profit, not income (which is higher). I just use a simple spreadsheet - 1 tab for income (so sales), 1 tab for outgoings - materials, postage, Folksy fees, PayPal fees, advertising, craft fair costs and then a summary sheet. That should do you.
When I first registered as a sole trader I made the mistake of volunteering to pay extra NI - even though I didn’t make the threshold, the good news is now you’ll be assessed for additional National Insurance when they assess your self assessment tax return. Do just bear NI in mind as an extra cost (you need to be earning about £5000 extra a year I think for this to become due).