I make glass paintings during my free time. It is my hobby. Now, if I want to sell those products through Folksy, do I need to pay tax? I am not looking for any huge profit but naturally the selling price would be little more than the amount I spent as it involves my efforts also. Please advise.
Yes you need to register as a business and pay tax on any profit but remember there are certain things you can claim tax exemption from - eg. cost of materials, use of home (small percentage of lighting/heating/internet/phone bills), mileage (for trips to post office, craft fairs etc), PPL insurance and probably others I can’t think of at the moment, so keep all your receipts. Good luck with your venture
Remember you will only pay tax if you earn over a given amount as well but you do have to register and complete the yearly tax return.
Thanks. But would you please specify what is the profit amount above which it will be taxable. Sorry but if you can help me with little more in detail that would be really appreciated. Example, declaring tax, declaring tax exemption, any licence, its cost…etc etc…any particular website where all these details can be found.
Thank you so much!
It depends what other income you have coming in. If you work and exceed your personal tax free allowance and already pay tax then any profit you make selling your work will be taxable. However if this is your only source of income then you have your personal allowance to play with before you would start paying tax on your profits - I think it is about £10,600 this year that you are allowed to earn before being taxed. You would still have to register your business and fill in a tax return but you won’t get a bill! Remember any losses you make can be set against any tax you already pay in other employment and also losses can be carried forward to the next year. HMRC website has useful information and I have found their phone helpline very useful in the past (if you are prepared to wait for someone to answer - can take a while!) Google self employed tax return and I expect it will bring up some links.
If this is your only income the tax return is really very simple, you just have to add up your sales and then subtract costs which would include cost of materials, postage, advertising, business cards, insurance, cost of listing and fees on folksy (and any other platform you use), petrol costs, use of home etc etc. If you have more than one business it is a little more complicated in that you have to break down your costs a bit more but if you have all the receipts and keep good records it doesn’t take too long (says she who is putting it off as long as possible!)
Just wanted to type the same info as Roz, she explained everything Unfortunately you do have to do all the paper work even if you make a loss at the end:(
If you’re selling with the intention of making a profit - any profit, however small - then you are running a business and need to register with HMRC as self-employed. You will then have to keep records and complete a tax return each year to calculate actual profits or losses.
If you’re only planning on covering your material costs (not your time), that’s a hobby and HMRC will probably not require you to register, but it’s better to check with them anyway, otherwise they’ll assume you’re running a business.
How much tax you pay will depend on your particular circumstances and the total income you have during the tax year.
I contacted HMRC by letter when my shop had been open 3 months…I told them the money I had got in…the money I spent out and also what I earned at a part time job. I asked if I needed to register…they wrote back and told me I did not qualify for self assessment as I was not making a profit and to only register if my combined income exceeded my personal allowance. I keep detailed records of sales and purchases though, together with the letter they sent…
It’s always best to make sure by contacting them. I prefer to do it by letter as I then have it in writing.
that’s interesting Kim, I would love to not bother with a tax return as I’m nowhere near the limit.
Thanks all for so quick responses. Yes, I am a full time employee and I do exceed that limit which means I would end up paying tax. Good suggestions, I would contact HMRC preferably in writing for confirmation. I didn’t keep my previous receipts :’( I need to track everything now on !!
It may be worth writing to them.
When I first set up I got so much conflicting advice with some saying I was just a ‘hobbyist’ and didn’t need to register, and others saying I have to register if I’m selling. Even an accountant friend told my not to bother unless I thought I was making enough to take me over the Personal allowance. I decided to play safe and write to HMRC and find out…seems silly to go through filling in a tax return that isn’t necessary…but I certainly didn’t want to be in trouble with the tax man.
There is a £100 fine if they catch you selling and have not registered with them, and you only have 3months from starting up to registrar.
As soon as you set up to sell you are a business it does not matter if you make a profit or not you still have to complete the tax form to be legal.
Do not set yourself up to be fined by HMRC.
Yes I hate doing my tax, but doing it online is easy even for novices like me and it is better than getting fined. In my area (Sheffield) they did do day seminars on how to do fill in forms and lots of other useful information. I found them helpful.
I admit i only scanned this but it seems TAX was covered lots and PLI was just touched on. You def need public liability insurance too as soon as you start to sell ANYTHING. You will need this if you attend any craft fayres and should have it even if not as ANYONE at anypoint in contact with your products can make a claim for any reason if they see fit. If you dont have PPI your stuffed basically.
All excellent advice here already. My husband is a tax accountant therefore I have ‘had’ to register but there is very little chance I will have to pay any tax (mores the pity!). You just have to remember that it is your responsibility to tell HM Rev about your business…if you don’t start on their right side things can get nasty.
I have already sent a letter to HMRC today and expecting response from them in writing about tax. Now the another thing is Public liability insurance- is that something compulsory or to be on the safer side. Because I can find quotes online which shows around £190 per year and I do not want that high. I think I need to dig more.
If you sell mostly to the UK you could use Ian Wallace, from what I remember it’s under £100 for the year for both public and product liability
Yes Ian Wallace is much more reasonable - about £71 I think. You shouldn’t sell unless you have the appropriate insurance. Good luck with it all xx
Will throw hastings into the pot for PPI insurance too. I use them I have 5mill policy which lets me do LOADS of events a year so i pay more than 70 a year but when i was on 1mill with them it was about 6 quid a month.