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What if you could make money from your hobby? Good news! Plenty of businesses and side-hustle projects are born out of simple hobbies and interests.

It seems like an ever-increasing number of people are running a side-hustle business in their spare time too, covering anything from woodwork crafts to graphic design and everything between the two. For some people it’s a way to earn extra income from a hobby that they already love, or even to test the waters of self-employment.

When does a hobby become a business?

Starting a side business based on a hobby is a good way to test out whether the entrepreneurial life is for you, and whether your hobby is profitable. In very general terms, your hobby is a business if you sell your products or services, and the income that you receive from doing so is more than £1,000 in a tax year. This £1,000 threshold is what’s known as the Trading Allowance.

What is the tax free trading allowance?

HMRC introduced it as a tax free allowance to cover “self-starters” with small, hobby-based businesses. It means that you can earn a total of £1,000 from self-employment in a tax year, before you even need to report it to HMRC or pay tax on the income. Note that we say ‘a total of’ – if you have multiple side-hustles (which is allowed), you won’t get a separate Trading Allowance for each one!
 

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What if I earn more than the tax free allowance?

If you’re making enough to go over the £1,000 threshold in a tax year, well done! Sadly, it’s also time to tell HMRC. Failing to register a business when you should do so usually means financial penalties and an array of backdated tax payments.

Will HMRC know if I earn more than the trading allowance?

Depending on how you receive your self-employed income, HMRC might find out about it whether you tell them or not! The digital platform reporting rules mean that the income received by some online sellers will be automatically reported to HMRC at the end of each year.

For instance, if you sell on Etsy then this information may be shared to HMRC, but that doesn’t necessarily mean you need to do anything differently as long as you’re complying with the tax reporting rules!

What business structure should I choose for my side-hustle?

The term side-hustle doesn’t actually indicate a legal structure, so you’ll need to choose one when you register your business. The pros and cons of each depend on your circumstances, so do a bit of background reading or chat to an accountant or business mentor before deciding anything.

By far the most common route for people running a side-hustle is to register for Self Assessment as a sole trader. This is very simple to set up, there isn’t a fee, and your information won’t be made publicly available like it would be if you were to register a limited company. But, as always, it’s important that you choose the structure which is best for you!

The Trading Allowance if you register as a sole trader

It’s worth noting that if you do register as a sole trader, you might still be able to use the Trading Allowance to claim tax relief against your income. Basically, you’ve got two choices:

It’s up to you which one you choose, but you can only use one method at a time. You might want to work out which one is most tax efficient for you. If you total all of your expenses and they are less than the trading allowance, using your trading allowance against tax will be more beneficial.

Should I turn my hobby into a business?

Doing something you love as a business is a completely different experience to doing it for fun. Running a business means taking into consideration profitability, expenses, tax, marketing and admin, on top of whatever you’re planning to sell. Plus, if your motive is to sell things to make a profit, or your sales are consistent or ongoing, then you may need to pay tax on what you sell.

We know it sounds a bit scary, but that doesn’t mean that it’s impossible. As online accountants, we’ve put together some advice on how you can turn your hobby into an HMRC-compliant business start-up.

Log all of your business transactions

When you start to do regular work it’s important to create bookkeeping records which log all your transactions so that your income, and therefore tax, is clear and accurate.

With simple bookkeeping software like Pandle, this is as easy as linking the software to your bank account so that transactions can be pulled over automatically. Some people also find it useful to open a separate bank account for their business, making it much easier to differentiate between business and personal transactions.
 

Claim your allowable expenses

Businesses pay tax on the profits that they make, so claiming your expenses reduces the amount of profit, and therefore the amount of tax which is due.

An example of how expenses work against tax

A hairdresser charges £20 to colour someone’s hair. The hairdresser spent £5 buying the dye. This means that the hairdresser has made £15 in profit, because £20 – £5 = £15.

They will pay income tax at a rate of 20% on the profit.

The hairdresser pays income tax on £15 (£15 x 20% = £3 tax) rather than on the full £20 (which would work out as £4 tax).

Now multiply that by all their customers, or for more expensive purchases. In some cases this difference can be really very significant!

 
Read our guide to the differences between operating as a sole trader or a limited company to help you decide which one suits you best, or chat to the team for help. Call 020 3355 4047, and get an instant online quote.

About The Author

Dean Salmon

I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes! Learn more about Dean.

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Joe
Joe
31st August 2021 11:06 am

Can losses from a hobby be used to offset other taxable income?
I have lots of expensive hobbies…

Elizabeth Hughes
Admin
Elizabeth Hughes
31st August 2021 11:26 am
Reply to  Joe

Hi Joe

Thanks for your message! You can only claim expenses which relate to your business activities. We have a guide which goes into a bit more detail about the sort of things that you can claim for: https://www.theaccountancy.co.uk/guides-videos/claiming-for-business-expenses, but let us know if you need any help.

Best wishes

Elizabeth

Sarah
Sarah
25th September 2021 11:01 pm

Hi! Thanks, this is a very helpful page. One query though: The income from my hobby-business exceeded £1000 the first year, therefore needing to pay tax. If income then drops to less than the £1000 the next year, is income in the 2nd year still taxable?

Elizabeth Hughes
Admin
Elizabeth Hughes
29th September 2021 9:08 am
Reply to  Sarah

Hi Sarah

I’m glad you’ve found it useful! If your income is lower than the trading allowance then you may not need to complete a Self Assessment tax return, but you must tell HMRC why. You can double check if you need to submit Self Assessment using HMRC’s online checking tool for SA.

Best wishes

Elizabeth

Nathan Braine
Nathan Braine
10th November 2021 11:22 am

Hi, great info! Does postage and packaging count as an expense? Or is that still taxable?

Elizabeth Hughes
Admin
Elizabeth Hughes
10th November 2021 2:50 pm
Reply to  Nathan Braine

Hi Nathan

Thanks for your feedback! Yes, postage and packaging is an allowable expense. We have a guide which goes into more detail, if that helps, or call one of the team on 020 3355 4047.

Have a great day!

Best wishes

Elizabeth

Sue Buckland
Sue Buckland
15th November 2021 7:39 pm

My sister and I have had a partnership since 2008. We hand paint glassware and sell online and also at craft shows. We had an accountant but he has now retired and our new accountant within the same accountancy is saying we cannot have a partnership where the profits are not split 50/50.
We have always shared mutual expenses ie public liability, show booking fees, FSB subscription etc on a 50/50 basis. But because we have our own designs, the sales of which are not split 50/50.
Have we been doing this all wrong for all these years?

Elizabeth Hughes
Admin
Elizabeth Hughes
16th November 2021 12:46 pm
Reply to  Sue Buckland

Hi Sue

Thanks for your message. It depends on what the partnership agreement says, but if there isn’t one in place then it should be 50:50. It is possible to put a partnership agreement in place where the profits are split differently, but it depends if you have one in place already. I hope this helps, but just let us know if you need help with anything, or call 020 3355 4047 and one of the team will chat through it all in more detail.

Best wishes

Elizabeth

Richard Nmezu
Richard Nmezu
9th December 2021 4:45 pm

I started a sticker business in 2019 and I didn’t earn over £1000 and only made like £11 from sales do you I still have to do tax returns I have been charged with a big debt of 1304 pounds

Elizabeth Hughes
Admin
Elizabeth Hughes
10th December 2021 4:25 pm
Reply to  Richard Nmezu

Hi Richard

Thanks for your message! Without knowing all the details specific to your case, it’s difficult to say for sure. Normally if the total amount of sole trader sales in a tax year is less than the £1,000 trading allowance, you won’t need to send a tax return or pay tax on that income. If this is something you would like us to help with in more detail, please do call one of the team on 020 3355 4047, or use the live chat button on screen.

Very best wishes

Elizabeth
Best wishes

Elizabeth

Nellie Lawson
Nellie Lawson
25th January 2022 12:09 pm

Hello Kara! Very interesting article… I’ve been asked to ‘rent’ my home out for a photoshoot this year, do I need to pay tax on the money I make from this if it’s over £1000? I’m thinking about trying to actively seek out more opportunities like this but I’m nervous about having to fork out for business set up fees etc when I just don’t know how lucrative or viable it is yet. How do I go about testing the waters without getting myself into trouble? I do work part time and am PAYE with that employer… so I’m already… Read more »

Last edited 2 years ago by Nellie Lawson
Elizabeth Hughes
Admin
Elizabeth Hughes
26th January 2022 4:01 pm
Reply to  Nellie Lawson

Hi Nellie Thanks for your message! If you rent the property out as a private person, then you can use the £1,000 trading allowance towards the income that you make from that (even if you’re already earning above the Personal Allowance with your employer). If the income from this is more than £1,000 in a tax year, you will need to tell HMRC about it, but then you have a choice: you can either offset the trading allowance against it (basically, deduct £1,000 from the income, and pay tax on what’s left), or offset your allowable business expenses against it… Read more »

Richard Wells
Richard Wells
27th January 2022 9:43 pm

This might sound like a silly question, if I start a side business while employed does that side business get taxed separately as it’s own entirely or would I just be taxed at the same rate as my current job?

For example I’m a 40% tax payer, if I start a side business I won’t get charged 40% tax on income from that business would I?

Elizabeth Hughes
Admin
Elizabeth Hughes
1st February 2022 5:00 pm
Reply to  Richard Wells

Hi Richard That’s not a silly question at all! Basically, the short answer is, sadly, yes. When you complete your Self Assessment tax return at the end of the tax year, you’ll include the details of any PAYE income (from an employer). Because this has already had tax and NI worked out on it, it means that any allowances, like the Personal Tax Allowance, have already been used up. For tax, it’s useful to think of your self-employed income starting from where your employment income stops. You’ll be taxed at that rate once you add it on to your PAYE… Read more »

Sam
Sam
14th February 2022 10:56 pm

Hi Elizabeth,

Thank you for this, it is most helpful. A quick question if you don’t mind:

If an individual had a salary of say £30,000 per annum and earned an additional £1,500 a year from a hobby business, would that individual only need to declare £500 on the self assessment (which would then be taxed at 20%) owing to the first £1,000 of additional income not being taxable due to the tax free trading allowance? Of course this is based on no expenses being claimed.

Many thanks in advance.

Sam

Elizabeth Hughes
Admin
Elizabeth Hughes
21st February 2022 9:29 am
Reply to  Sam

Hi Sam Thanks very much for your message! The individual would still need to declare all of their self-employed income on their Self Assessment tac return – in this case, the full £1,500. If no expenses are being claimed, the individual would then complete the section of the Self Assessment which states they are using the £1,000 trading allowance, and this will then be offset against the £1,500 total, leaving them to pay tax on the remaining £500. And, quite right, that £500 would then be taxed at the rate that the taxpayer was subject to in that tax year.… Read more »

Levi
Levi
9th March 2022 3:33 pm

Hi,
I am looking to register my side hobby as a business.
I make no money from this, so do I still need to go through all the drama of taxes? Or do I just not say anything as it is less than that £1,000 mentioned above?

Elizabeth Hughes
Admin
Elizabeth Hughes
14th March 2022 2:14 pm
Reply to  Levi

Hi there

If the total income that you receive from self-employed activities in a single tax year is less than the £1,000 trading allowance, then you won’t need to register as self-employed with HMRC. If your total self-employed income is more than the allowance in a single tax year, you will need to register. And remember, working this out is based on your income, not just your profits!

I hope this helps, but let us know if you need anything at all 🙂

Best wishes

Elizabeth

Adam Denman
Adam Denman
14th March 2022 2:51 pm

This is a helpful article. Just to clarify something though. If I make £1500 with my hobby, and I earn £25000 through my salary, I only pay the 20% on the £1500 right? Because total income would be £26500 but £25000 is from my salary. Im just really scared Ill end up ruining myself with tax if I try and make some money with my hobby 🙁

Elizabeth Hughes
Admin
Elizabeth Hughes
14th March 2022 5:08 pm
Reply to  Adam Denman

Hi Adam Tax can sound so scary can’t it! OK, so if you earn £25,000 as a salary from an employer, they will (or should!) be deducting tax and NI from your wages each time they pay you, and then paying it onto HMRC on your behalf. So that part of your tax is taken care of, you won’t need to pay it twice. Then you earn a further £1,500 from self-employment. Add this on to your employed income to work out which tax bracket it falls into, so you know the tax rate – in this case it will… Read more »

Madeline
Madeline
13th April 2022 4:40 pm

Hi, is the £1000 trading income or trading profits? Given that i have a side business which revenue was about £7000 in revenue but after taking into consideration all expenses such as website, etsy fees, postage and packaging fees this was reduced considerable and also that i had to order more goods when out of stock so its a case of rolling money over. Does this still mean i have to fill out self assessment even though there is no profit? Thank you

Elizabeth Hughes
Admin
Elizabeth Hughes
14th April 2022 10:04 am
Reply to  Madeline

Hi Madeline

Thanks for your message. It’s the trading income – so if your total self-employed income, before any deductions, is more than then £1,000 trading allowance, you will need to submit a Self Assessment tax return.

As a side note, if your total allowable expenses are more than £1,000 then it will be better for you to claim these, rather than the allowance!

I hope this helps, but if you’d like to chat to the team, call 020 3355 4047 or use the live chat service – we’ll do all we can to help!

Best wishes

Elizabeth

Vicky
Vicky
15th April 2022 7:35 pm

Hi! Thank you so much for the super useful article and for answering questions too. Going back to your example with the hairdresser charging £20 for colour and only paying £5 with the dye, how does one also calculate labour, ie the time taken to do the job? I have a side hustle and I don’t make much profit at all, if I have to start paying tax this will considerably reduce the profit made and almost making this not worth it, as I already only include material in the calculations without the time taken to do it or the… Read more »

Elizabeth Hughes
Admin
Elizabeth Hughes
19th April 2022 9:44 am
Reply to  Vicky

Hi Vicky You’re very welcome! If you operate your business as a sole trader you can’t count your own labour as an expense. This is because there’s no legal separation between a sole trader and their business (basically you are the business) so you simply keep any profits that you make, rather than paying yourself a salary. It means it’s very important to make sure that you charge clients an amount which factors in your time! You may be able to claim other costs, such as the electricity that you mentioned for production. There are different methods for working this… Read more »

Jonny
Jonny
29th July 2022 4:08 pm

Hey there, hoping you can help. I am in band as a hobby with 3 other people, we split all our income and expenses between us 1/4 each. Are we entitled to a combined trading allowance of £4,000 (£1,000 each) of gross turnover before we need to declare this? It is possible we may exceed £4,000 in the future however, our expenses a are likely to be much higher than any gross profit made. We understand we may each need to do a tax return confirming our share of the profits when above the trading allowance, but we assume we… Read more »

Elizabeth Hughes
Admin
Elizabeth Hughes
4th August 2022 8:54 am
Reply to  Jonny

Hi there Thanks so much for your message! So, if your annual gross trading income is £1,000 or less, from one or more trades, you may not have to tell HMRC, but the trading allowance is linked to the person, so unfortunately this means that you can’t pool your allowances for the band. You mentioned that one of the band members is already self-employed as a gardener, so it’s worth noting that the trading allowance covers all of your self-employed income in a tax year. When they submit their tax return (assuming they submit Self Assessment), then they’ll show that… Read more »

Jonny
Jonny
4th August 2022 12:38 pm

Thank you Elizabeth this is very helpful. One more question if I may. At the moment the money we save into the band and use for expenses, vastly outweighs what we are earning. If we were to start a company we will need to each continue to save/gift money to the company so that there is enough money in the company to cover the band/company expenses. Our earnings would not be sufficient to cover expenses and we wouldn’t want to incur any company debt when we are able to use our own funds. Are we able to add our personal… Read more »

Ellen
Ellen
18th August 2022 11:38 am

Example – My income from my new business was £3,000 but my expenses were £5000. What happens on this occasion? I also work full-time as an employee for another business and have an income of £35,000. Thanks

Elizabeth Hughes
Admin
Elizabeth Hughes
31st August 2022 5:02 pm
Reply to  Ellen

Hi Ellen Lovely to hear from you, thanks for you message. So in that case there would be no tax or National Insurance to pay on the self-employment side of your earnings that year. The loss then gets carried forward to be offset against future profit, or it can be offset against other types of income in the tax year on the Self Assessment, such as the PAYE income that you earn as an employee. I hope this answers your question as a starting point, but if you need any help at all, call the team on 020 3355 4047… Read more »

Janet Crossley
Janet Crossley
1st October 2022 11:00 am

If I want to sell goods from my hobby business to customers abroad, how should I fill in the customs declaration form and how do I know if I’ll get charged any fees? If the country wants to charge me fees, how does that happen? I’m only sells goods that will fall under the £1000 limit you’ve mentioned. Thanks

Elizabeth Hughes
Admin
Elizabeth Hughes
6th October 2022 3:08 pm
Reply to  Janet Crossley

Hi Janet

Thanks for your message, although we don’t advise at all on importing or exporting, so might not be much help with your query! If your UK sales are under £1,000 then you won’t need to submit a Self Assessment because they will be covered by the trading allowance.

Do let us know if there’s anything we can do!

Best wishes

Elizabeth

Naveen
Naveen
6th October 2022 10:33 pm

Very helpful information- thank you. Not sure what might be recognised as “allowable expenses” are, though? Thank you again!

Elizabeth Hughes
Admin
Elizabeth Hughes
10th October 2022 9:25 am
Reply to  Naveen

Hi Naveen

Thanks very much for your comment – and that’s an excellent point about allowable expenses, I apologise for not linking to our guide from the article. We’ll get on to that right away, but in the meantime, you can find our guide here, or call the team for more info on 020 3355 4047.

Best wishes

Elizabeth

Andy
Andy
1st November 2022 9:14 pm

Great article, very useful. However, I hope you can clarify one thing for me. I am employed full-time and pay tax on PAYE.

However, if I were to make money from a hobby and the total from it was below the £1,000 p/a do I still need to declare it? Or is the £1,000 threshold separate from normal earnings?

Elizabeth Hughes
Admin
Elizabeth Hughes
7th November 2022 2:42 pm
Reply to  Andy

Hi Andy

Thanks for the lovely feedback! So the £1,000 trading allowance for self-employed income is separate to the money you earn from your employer (which you pay tax on through PAYE). This means that you can earn a salary from your employer, and then completely separately you can also earn up to £1,000 self-employed income before you need to start reporting it to HMRC.

I hope this makes sense, but let us know if there’s anything we can do to help!

Best wishes

Elizabeth

Adrian
Adrian
3rd January 2023 11:16 am

I’m retiring a few years early. In the next tax year my only income will be from my own savings and a pension pot that I will be cashing in. After my tax-free lump sum and year’s tax allowance for the year I expect to be paying about £4K tax on the cashing-in process. I intend to start up as a freelance photographer which will have about £5K start-up costs. If I don’t break even in my first year, can I offset some of the £4K tax against my losses?

Elizabeth Hughes
Admin
Elizabeth Hughes
11th January 2023 5:01 pm
Reply to  Adrian

Hi Adrian

Thanks for your message! It is possible to offset sole trader losses against other employment and pension income, but based on the information you’ve given us it’s difficult to say one way or another. It also depends on any other income, so until the time came to do the return in full it’s tricky to say for sure, and I wouldn’t want to give you a definite answer (sorry!).

If there’s anything we can do to help, just let us know.

Best wishes

Elizabeth

Paige
Paige
18th January 2023 3:41 pm

Hi Elizabeth – I have recently started earning money from creating digital content online but i still have a day job (PAYE) – I understand that i will have to declare and pay additional tax on what i have made but am i able to offset this with the expenses that i have incurred whilst doing this? would it be beneficial to open a limited company to separate the two but would that also mean paying two lots of tax? help! thank you

Elizabeth Hughes
Admin
Elizabeth Hughes
19th January 2023 11:40 am
Reply to  Paige

Hi Paige Thanks so much for your message. First off, you can earn up to £1,000 of income from self-employment in a tax year before you need to report it to HMRC, register as self-employed, or pay tax on it – this is known as the trading allowance. In answer to your question – yes, you can offset any allowable expenses against your income, and then you’ll pay any tax against the profit that you make. (An important note – the trading allowance is income, not profit). Whether or not you do this as a sole trader or as a… Read more »

Laura
Laura
10th February 2023 10:52 am

Hi. I want to open a Ko-fi/Gumroad site to sell digital wallpapers and get tips. To do this you have to link your PayPal and it has to be converted to a business account. I’m just doing this to make a little bit of extra money from my artwork and the income won’t be higher than £1000. Do I need to tell HMRC anything when converting my PayPal to a business account?

Elizabeth Hughes
Admin
Elizabeth Hughes
14th February 2023 9:06 am
Reply to  Laura

Hi Laura

Thanks for messaging. You won’t need to tell HMRC that you have a business account, but you will need to keep records of all your transactions to keep an eye on things, and then register with HMRC if your self-employed income goes above the £1,000 trading allowance in a tax year.

If you need any help with anything, just let us know!

Best wishes

Elizabeth

Sarah
Sarah
11th February 2023 7:25 pm

Hi – thanks for this post, I found it very helpful. I have one question if I may…my husband and I enjoy writing and photography as hobbies and earn a small income from submitting articles to travel / nature magazines for publication. As each article (writing and pictures) is a joint effort, does this mean that between us, we could earn £2000 per year before we would need to report this to HMRC? Or would the trading allowance remain at £1000 despite the fact it is a joint hobby?
Many thanks in advance
Sarah

Elizabeth Hughes
Admin
Elizabeth Hughes
14th February 2023 9:07 am
Reply to  Sarah

Hi Sarah Thanks very much for your kind words, I’m glad you found it useful! OK, so the £1,000 trading allowance is available on an individual basis, meaning that you are entitled to £1,000 each of self-employed income in a tax year, before you need to start telling HMRC and paying tax on it. An important point, just in case: You won’t be able to combine your allowances, as such. For instance, if you take on an additional project by yourself, so you earn £1,200 and your husband earns £800, you can’t just combine your allowances and share the £2,000.… Read more »

Sarah
Sarah
14th February 2023 9:37 am

Hi Elizabeth – thank you so much for the reply. Very much appreciated.
Best Wishes
Sarah

Fiona
Fiona
14th February 2023 9:17 am

Hello,
Can I claify some information please.
I already have a full time PAYE job which I’m paid about £35,000, but I have started to sell some of my craft items I make as a hobby.
Can I confirm that I can earn upto £1000 profit (sales – materials) before I have to even declare this to HMRC?

Elizabeth Hughes
Admin
Elizabeth Hughes
14th February 2023 9:20 am
Reply to  Fiona

Hi Fiona

Thanks for your message. The £1,000 trading allowance is based on income, not profit. So you can earn a self-employed income (before making any deductions for costs etc.) of up to £1,000 in a tax year before you need to inform HMRC.

I hope this makes sense, but please do let us know if you have any questions!

Best wishes

Elizabeth

Fiona
Fiona
14th February 2023 9:22 am

Hi Elizabeth,
Thank you for confirming that bit, so I can earn £1,000 along side my current PAYE job before I have to declare it to HMRC?

Jack
Jack
15th February 2023 11:03 pm

Hello, thanks for the article. I have a full time job and am doing some web development work for a friend’s company on the side, this I charged £300 for. I won’t be doing any other work this year so will be under the £1k. They’ve asked for an invoice to pay the money into my bank and I am wondering does this change anything in regards to not having to notify HMRC? I’m also wondering do I add VAT onto the invoice, so £300 + 20% VAT? Thanks in advance

Elizabeth Hughes
Admin
Elizabeth Hughes
16th February 2023 3:14 pm
Reply to  Jack

Hi Jack You’re very welcome! Even if you invoice the client, as long as your self-employed income is less than £1,000 in a tax year, it’s covered by the trading allowance and you won’t need to notify HMRC. VAT is a separate point. So a business only needs to register for VAT once it’s taxable turnover reaches £85,000 in a 12-month period. If you’re not registered for VAT, don’t add it to the invoice (because you won’t have a VAT number, or a way to pass the VAT you collect on to HMRC… etc!). This article explains VAT in a… Read more »

Reece
Reece
24th March 2023 11:58 pm

Hi, my wife has OCD and cannot leave the house at the moment and is starting Cambly, talking English to learners from other countries.
This is her only job, does the first £1000 rule not apply to her.
Would she still be able to earn £12,500 before having to pay tax.
I understand she will have to keep accounts etc.
Thank you

Elizabeth Hughes
Admin
Elizabeth Hughes
27th March 2023 9:48 am
Reply to  Reece

Hi Reece Thanks very much for your message. The £1,000 Trading Allowance is available even if this is your wife’s only source of income, so the allowance is still available. You’re right, your wife will need to keep bookkeeping records, even if her income is below £1,000. If her earnings go above £1,000 (or if you expect/plan for them to do so), she’ll need to register for Self Assessment and report her income. The Personal Allowance means that you won’t normally need to pay any tax on the first £12,570 of income that you receive in a tax year, but… Read more »

Ian
Ian
12th April 2023 4:07 pm

Good article and your replies have helped however, ploughing through the HMRC site is like a minefield so here’s an odd one. Walking in on our dog smoking a cigar has resulted in 90 days later our dam having had 12 unintended pups. We’re selling them (pedigree) but clearly we have to declare the income, we’re not a business nor hobbyists and she’ll be spayed sharpish. Am I able to split the income equally or otherwise, 3 ways to family members? I’m 40% so would apply all costs etc to my share, partner is 20% Q is, can my partner… Read more »

Elizabeth Hughes
Admin
Elizabeth Hughes
12th April 2023 5:03 pm
Reply to  Ian

Hi Ian, Thanks for your message and the good laugh! OK, so on the basis that you haven’t bred the puppies and that you’re not licensed traders, then this is not a hobby or trade income. Technically the dog is an asset, which just so happens to have had puppies. It means that this likely falls under Capital Gains Tax (brace yourself for the jargon that’s coming your way). So, as this is a pet, it’s likely to be classified as a ‘wasting chattel’. HMRC use the term ‘chattel’ to indicate a tangible, moveable asset (rather than something more stationary,… Read more »

Ian
Ian
12th April 2023 5:15 pm

Thank you so much for the advice. He’s taken up vaping now which is a step in the right direction and they are cheaper than a panama!!

Sam
Sam
22nd April 2023 3:17 pm

The information on your website is very helpful! I’ve started teaching yoga in addition to my normal PAYE job. As I think I may (slightly) exceed the £1,000 allowance limit over the year, it looks like I’d be better adding up my expenses to calculate the profit. I pay personal insurance and a membership fee to my yoga organisation. As part of membership, I must participate in a number of hours of workshops and classes over the year. As these are requirements of membership renewal, can they be classed as tax deductible expenses? I would guess that all classes I participate… Read more »

Elizabeth Hughes
Admin
Elizabeth Hughes
28th April 2023 8:42 am
Reply to  Sam

Hi Sam

Thanks very much for your lovely feedback. So in HMRC terms, as long as the expenses are wholly, exclusively, and necessary to trade then yes, they’re allowable!

I hope this helps, but do let us know if there’s anything at all you need.

Best wishes

Elizabeth

Joe
Joe
19th June 2023 11:06 pm

Hi Thank you for such a great article. Just have a scenario in my mind which i hope you can clarify. I am in a 40% tax bracket. Firstly assume i started a small side hustle in October 2022 buying shoes from a retailer and selling it on through Amazon and other channels. In total i spent around £5000 to buy the goods from the retailers and ended up selling all the goods for a total of £7000, thus turning a profit of £2000. Question 1: how do i declare this income? is it correct that i need to register… Read more »

Elizabeth Hughes
Admin
Elizabeth Hughes
22nd June 2023 4:58 pm
Reply to  Joe

Hi Joe Thanks for your message and your kind words! OK, so looking at your questions: 1. It’s really up to you whether you decide to operate your side hustle as a sole trader, as a limited company, or something else. There are pros and cons of each depending on your circumstances, which this article explains in more detail. The structure that you choose is important, because this decides how you declare the income. You mentioned Self Assessment, in which case you would register for Self Assessment as a sole trader. You would need to register no later than 5th… Read more »

Charlotte Ryder
Charlotte Ryder
11th September 2023 10:06 pm

Hi there, do you still get this £1000 tax allowance if you have a full time job? Is it I’m addition to the personal allowance? So I pay my taxes on my day job, but from my side hustle if I don’t earn £1000 in a year I don’t lay any tax, is that right?

Elizabeth Hughes
Admin
Elizabeth Hughes
18th September 2023 12:41 pm

Hi Charlotte Thanks very much for your message. So the £1,000 Trading Allowance only applies to the total amount you earn from your self-employed sole trader income in a tax year. This means (as an example) you could work for an employer during the day, and earn a salary of £30,000 a year, and then in the evenings you could work on two different side hustles which earn up a combined total of £900 in a tax year, and you wouldn’t need to report your side hustles to HMRC. I hope this helps, but do let us know if there’s… Read more »

Diane
Diane
13th October 2023 3:42 am

Hello. I’m thinking of doing a small amount of care work for an old person I know. Maybe one or two hours a week eg making lunch. Pay is low and I’m unlikely to earn more than £1000 in any tax year. I have no care qualifications. Would this count as a hobby and could I use the £1000 a year tax free allowance. If necessary paying tax on any payments over the first £1000

Thanks

Elizabeth Hughes
Admin
Elizabeth Hughes
17th October 2023 10:29 am
Reply to  Diane

Hi Diane Thanks very much for your message. Yes, the trading allowance means that you may be able to earn up to £1,000 from self-employed activities in a tax year, without needing to report this to HMRC, or pay tax on those earnings. If your self-employed earnings go over the £1,000 allowance in a tax year, you could still claim the allowance, and then pay tax on your earnings above the threshold (or you could claim any allowable expenses relating to your self-employed work, if the total of these was more than £1,000). I hope this helps, but please do… Read more »

luke chittock
luke chittock
18th October 2023 8:08 am

Hi, this is a very useful page with lots of valuable information. My hobby is flying falconry birds. one of the sites I visit now require a business account for Insurance purposes and they want to pay expenses for me as they have really liked the positive impact I have had on their business. they have offered me £100 a month. my question is would this constitute as having to pay tax as its going to be non profit and would I still need to declare this as I will have set up my own business?

Elizabeth Hughes
Admin
Elizabeth Hughes
20th October 2023 1:04 pm
Reply to  luke chittock

Hi Luke Thanks so much for your kind words – that sounds like an interesting hobby! OK, so you can earn up to £1,000 in a tax year (6th April – 5th April) from self-employment or hobbies (HMRC call it the trading allowance for miscellaneous income) before you need to report it to HMRC. If you go over the £1,000 trading allowance, you will need to register for Self Assessment with HMRC. At that point you can either: choose to claim the £1,000 trading allowance (and pay tax on anything you receive that’s over that amount) claim tax relief on… Read more »

Anna
Anna
9th January 2024 3:58 pm

Hello just wondering if you could help me. So I only work 8 hours a week so a very low job income around 6k a year and also i care for my mother 35 hrs a week.
I sell on vinted alot of my own items but also new items from charity shops car boots ect. To make extra money. If its over £1000 will it be taxable or will it fall under The Personal Allowance threshold at £12,570 ? Sorry if its a daft question am not great with things like this.

Elizabeth Hughes
Admin
Elizabeth Hughes
12th January 2024 8:45 am
Reply to  Anna

Hello Anna Not a daft question at all! So, looking at the money you make from self-employment, property or other miscellaneous income (basically any income that you receive that hasn’t already gone through the process of being taxed) – if the total amount of this is more than £1,000 in a tax year then you’ll need to register for Self Assessment, and submit a tax return which covers that tax year. Submitting a tax return doesn’t automatically mean that you need to start paying tax on everything though. You’ll still be entitled to: The £12,570 Personal Allowance: and this will… Read more »

Emma dorothy
Emma dorothy
19th April 2024 9:48 am

Hi, I am full-time employed and pay higher rate tax on my income. I want to start a “side hustle” as a sole trader. Will I be taxed at the same rate as my income?

Elizabeth Hughes
Admin
Elizabeth Hughes
19th April 2024 11:42 am
Reply to  Emma dorothy

Hi Emma Thanks very much for your message. So, sole traders pay tax by submitting Self Assessment tax returns after the end of a tax year, but employees are taxed throughout the year. This is important because it means that your sole trader profits basically pick up where your wages left off, so they’ll be added on to your employment income and subject to the same tax rate unless your earnings reach the next tax bracket. Anything which tips over into the next bracket will be subject to the rate of tax which applies to that bracket. A few things… Read more »

Emma dorothy
Emma dorothy
19th April 2024 12:15 pm

Thank you so much for your prompt and helpful response.

Last edited 1 month ago by Emma dorothy

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