earning on the side, when is it taxable?

fenwick458

for about 3-4 years a friend of mine been involved in some other way of making money aside from their main job, they estimate on average 10% of their salary has come from these other means which are all perfectly legal, and mainly relate to their hobbies.

what is the threshold for making money on the side? just wondering about their position, incase the tax man says something which is unlikely.

BoGoF

In answer to your question - always....so there is nothing legal about your bit on the side.

Derivative

The threshold is that for 20% tax.
You pay income tax on all income above that threshold regardless of source.

BoGoF

So you've now edited your post to say a friend of yours instead of you.......why would you do that ?

HappyMJ

Profit from hobbies is not taxable yet the profit from a business venture is taxable. When does a hobby become a business? I would say when you are no longer investing the profit back into the hobby. My friend makes wine as a hobby. He makes a bit of profit but the entire profit is ploughed back by buying better equipment. If it were on accounts it would all be valid expenses anyway but eventually he will have all the equipment he needs and he will be making real profit. At that point he should be declaring the profit and paying tax on it.

If you take a cash profit then pay tax on it. If you spend the profit on the hobby then don't worry too much about it.

BoGoF

HappyMJ wrote: »

Profit from hobbies is not taxable yet the profit from a business venture is taxable. When does a hobby become a business? I would say when you are no longer investing the profit back into the hobby. My friend makes wine as a hobby. He makes a bit of profit but the entire profit is ploughed back by buying better equipment. If it were on accounts it would all be valid expenses anyway but eventually he will have all the equipment he needs and he will be making real profit. At that point he should be declaring the profit and paying tax on it.

If you take a cash profit then pay tax on it. If you spend the profit on the hobby then don't worry too much about it.

The OP has edited their post but originally said 10% of their income came from this 'venture' - hardly a hobby.

And I would doubt HMRC would agree with your viewpoint, depends on turnover etc

Thrugelmir

[QUOTE=HappyMJ;49686201He makes a bit of profit but the entire profit is ploughed back by buying better equipment. If it were on accounts it would all be valid expenses anyway but eventually he will have all the equipment he needs and he will be making real profit. At that point he should be declaring the profit and paying tax on it.

[/QUOTE]

Has your friend obtained a licence?

Also the Customs & Excise may be interested in his activities. As duty is payable.

HappyMJ

BoGoF wrote: »

The OP has edited their post but originally said 10% of their income came from this 'venture' - hardly a hobby.

And I would doubt HMRC would agree with your viewpoint, depends on turnover etc

10% of what? When I was younger much more than 50% of my income came from my hobby....but my income was not much and all the profit went straight back in to buying hobby related things. If I were to assume his main day job was earning minimum wages £6.08, 37.5 hours, 52 weeks and 10% of that is only £1,185 per year...To me that isn't much...£22.80 per week. Is that a hobby or a business venture? I make more than that now doing odd jobs for people which I would consider a hobby...i.e fixing broken iPhone screens. I'm not qualified I just do it because it's usually a mate and I like taking things apart. What's the threshold? There isn't one. It's self assessed.

HappyMJ

Thrugelmir wrote: »

Has your friend obtained a licence?

Also the Customs & Excise may be interested in his activities. As duty is payable.

Wine making is a hobby. He does not need a licence.

BoGoF

10% of £22000 they said.

If somebody is doing something for profit then it could be construed as trading - even for a turnover of £1000.

BoGoF

HappyMJ wrote: »

Wine making is a hobby. He does not need a licence.

If he's selling it duty may be payable.