Hobby turned self employment - what are business expenses?

student100

I've tried searching for answers and read the Taxing Times articles on the main site but I've not seen this answered yet...

I'm employed full-time. As a hobby, I take photographs. I recently decided to put some of these up for sale with an agency, and now have had my first sale (not actually got the money yet, but that's a side issue...). Only about £60 and I've no idea whether I'll make more money or not to be honest - what sells when and for how much is hard to predict.

I called the HMRC Newly Self Employed number today and the lady said I need to register as self employed. As I don't expect to make more than £4825 a year from this she said I can register as exempt from class 2 NICs and has put the form in the post.

I understand that I'm liable to pay tax on any income from my sales, but I'm a little confused as what I can count as business expenses and capital allowances. I have some physical equipment (camera, lenses, accessories etc) which are obviously required for the 'business', but then I also use them for personal use some of the time too (i.e. to take photos of family etc. that would never sell). I also have some other expenses e.g. travelling specifically to take photographs - but then sometimes I'm going somewhere anyway and happen to take the camera along...

From what I can tell, I can count a proportion of the capital costs as business capital - e.g. if I use the camera 50% business 50% personal I can count 50% of the cost and then put that towards capital allowances? How am I meant to work out the split between business and personal use for something like a camera? How does it work for the other expenses e.g. travel?

If I end up with a net loss at the year end, presumably I don't pay any tax on the photography earnings - but am I right in thinking that unless I expect the 'business' to eventually turn a profit (I don't really, just trying to make my hobby pay a little bit for itself) I can't offset these losses against my PAYE tax for my main job?


Thanks for any pointers anyone has - I'm obviously not expecting professional tax advice but if anyone's in a similar situation I'd like to understand what you do.
Obviously it's not worth me paying an accountant at this stage as my self-employment earnings are tiny at the moment.

Conor_3

OK..
Equipment you use for both business and personal. In this case, you claim a percentage of the cost which is the percentage of the time it is used for business. In the case of the camera, think of how many of the photos are business and how many are family BUT I'd not claim the capital costs of the joint use camera as you'd have to declare a percentage of its value as an income (for example when you'd sell equipment used in the business) when you ended the business and it returned to solely personal use.

Your main expenses are going to be in the consumables plus postage, packing, marketing, advertising, website creation etc.

If your business runs at a loss, you CAN offset that loss against your PAYE. When you fill in the self assessment tax form, there's a page for PAYE and what tax you've paid in addition to the box for profit/loss. If there's a loss, this is deducted from your gross wage on PAYE and then the tax you should pay on the resulting figure is assessed, compared to what you've paid via PAYE and then you're refunded.

Savvy_Sue

I would keep a record of your travel costs, whether you're going there with the specific intention of taking photos you might sell, or just toddling along anyway. If you sell a photo from a particular jaunt, you should be able to offset the travel costs as an expense.

If you're not sure what you'll be able to claim, just keep records of everything you MIGHT be able to claim. Then at the end of the year see what seems 'reasonable'. You've spent £100 printing 100 photos both personal and 'professional', and sent 50 to agencies but only sold 20? Then I think that £50 is 'reasonable'.

Good record keeping will be the key here.