Advice Appreciated - Hobby

jakann86

Hi,

Sorry if this is in the wrong forum area, I wasn't sure of the most appropriate area.

Basically I handmake cards and I am thinking of selling a few to friends/family/colleagues. I am not interested in making a profit or starting a small business (thought about it but I wouldn't make money on it and too many people doing it). I am wanting to make a few cards, sell them and use the money to buy more cardmaking supplied, basically helping to fund a very expensive hobby. What I want to make sure of is that I am not doing anything wrong tax wise...I don't want to register as self employed or fill out a tax return at all...so advice would be appreciated.

Cost of materials would be about £1-1.50 per card and it takes about 15-45 minutes to make each card (pulling figures out of my head, in terms of money that would be £1.50-4.50 per card in my time based on £6 minimum wage). I want to sell the cards for around £2-4 each so I would not be making any profit on it...but does the money I make for my time count as profit in tax terms? Do I need to be selling for no more than the cost of materials to prevent a problem with tax? I am only looking at selling small numbers of cards - maybe 20-30 every few months.

Hopefully I haven't confused you as much as I have confused myself!! :rotfl:

Thanks for any advice!

soolin

Strictly speaking you should register with HMRC as self employed as you are selling things in order to make a profit. tax would be calculated by taking all expenses (not your time though) away from the sale proceeds.

Unfortunately you may well find yourself turned in by 'friends ' otherwise. It may well be that after expenses you don't actually make a profit at all, but it should be declared.

jakann86

Thanks for your help. I was hoping there would be a way without all the form filling but obviously not! Never mind, I won't bother with selling them then (it wouldn't be worth the hassle of filling the forms in!).

Thanks again.

jakann86

Just found this example on HMRC website in case it is useful for anyone else:

Example 1
Gail is a full-time employee working for a stationery company. She pays her PAYE tax on this employment every month.

In her free time Gail makes cushions and uses most of them in her home. Occasionally she sells them to friends and work colleagues for an amount that just covers the cost of materials of £15. Sometimes she makes a loss. Any money she does make goes towards her holiday fund.

She decides to make extra cash by selling cushions on an Internet auction site and starts auctioning three or four to see how they go. They all sell for more than £50, a profit of at least £35 each.

She uses this money to buy more materials and within a month she is selling around ten cushions a week, always at a profit, and is considering setting up her own website.

Gail’s initial sales of cushions to friends are not classed as trading. It lacks commerciality and she does not set out to make a profit. The occasional sales are a by-product of her hobby. Once she begins to auction her cushions, she has moved into the realms of commerciality.

She is systematically selling her goods to make a profit. She will need to inform HMRC about her trade, and keep records of all her transactions. On the level of sales shown in the example the potential turnover of around £26,000 is well below the VAT annual threshold of £61,000 so Gail does not need to register for VAT.