registering a hobby for tax purposes

smojo

Hi

For a while I have been making craft items purely as a hobby but recently there has been an interest from people wanting to buy the odd item. I don't want to turn it into a business as such with all the admin involved - paperwork, opening business acoount, self assessment etc and don't envisage making more than a few hundred pounds/year profit. But I don't want to find myself being chased by the IR though and am wondering about registering with them. It seems a lot of effort might be involved just to declare a profit of two or three hundred quid but I do want to stay on the right side of the law. Does anyone know if there is some sort of short version for such a case. I know I won't need to pay NIC for such a small amount and I'm even thinking of donating any profits to charity so that no tax needs paying but I guess the taxman would still want to know about it. I've looked at the IR website and can't get any clues. Any advice welcome please.

fengirl_2

You can't have it both ways - you either stay on the right side of the taxman and register as self emloyed, keep proper records, produce accounts and self assess, or you don't declare this income. There is no half way.
As for donating the profits to charity, you would need to set up a company to enable you to do this - take professional advice. There is no tax relief for an individual donating money to charity.

Savvy_Sue

Do you have another income? The situation would be different if you didn't.

firesidemaid

i registed as a sole trader for ebay purposes a few months ago.

depending on your other earnings, you may not have to pay tax or any more NI - you can fill in a small earnings exemption form which they will send you.

they will also send you on a really useful (more useful than anyone on the end of the phone) free half day course - i found it really helpful and reassuring.

you will have to fill in a short assessment form, but it is actually quite simple.

Tim_Charles

To make life easier, why don't you just give away the craft items to your friends as gifts and ask them to make the donation to charity of your choice

anamenottaken

fengirl wrote: »

As for donating the profits to charity, you would need to set up a company to enable you to do this - take professional advice. There is no tax relief for an individual donating money to charity.

There's gift aid, surely. Does that not benefit a higher rate tax payer?

fengirl_2

Gift aid only gives you higher rate relief if you are a higher rate taxpayer. You pay basic rate tax on your profits no matter what you do with those profits. The charity then reclaims the basic rate tax - it doesnt affect your tax liability.

martindow

I would speak to HMRC who I always find very helpful. If you have a PAYE job they will sometimes classify your new business as a hobby on the basis that by the time you set off all your expenses it may well make a small loss which would only offset your PAYE. Get some figures together, give them a call and get anything confirmed in writing.

smojo

Thanks everyone for your replies, food for thought.

You can claim donations to charity against your tax bill, I've done it in the past.

I'm semi-retired now and on a low income but do have a small amount of tax to pay so any earnings from my hobby would be taxable. I like the idea of making a small amount of money to fund the hobby but it just seems such a lot of hassle if I decide to register just for a couple of hundred quid.

ragz_2

Personally I wouldn't bother, there are a lot more people out there earning a lot more without registering. Also I doubt it'd be profit after all your materials anyway but...

Of course I'm not allowed to say that though...

soolin

ragz wrote: »

Personally I wouldn't bother, there are a lot more people out there earning a lot more without registering. Also I doubt it'd be profit after all your materials anyway but...

Of course I'm not allowed to say that though...

No , defrauding HMRC is so difficult to defend especially when people get caught and a criminal record is so distressing to have to explain to people.

OP phone HMRC, they are really helpful and it will barely inconvenience you at all to do short accounts. All you will need to do is keep a note of all your income, a list of all expenses, take one from the other and declare next profit on your tax return each year.

I do my tax return online and there is a choice of long or short accounts if your turnover is under £15k a year, I opt for short and it is literally 3 lines, gross, less expenses =taxable profits.

If you have limited other income then your left over allowances may even reduce your tax on this employment to nil.