Wanting to start a hobby business

WillowCat

I am the partner and carer for a disabled person. I claim carers allowance and my partner has a joint claim for income based ESA. We also claim council tax benefit but not housing benefit as I own my home outright.

I have a hobby - silversmith - but as you can imagine it's an expensive hobby to have, so I'd like to raise money for more materials by selling some of my work. This isn't intended as a business (the market is fairly saturated so difficult to make a decent income from it) but more to keep my sanity as caring can be a lonely thankless task.

I'm comfortable with keeping books for HMRC, and know I need to register as self employed. I have just purchased liability insurance and will be applying for my hallmark registration soon.

The only thing I'm worried about is exactly when I tell DWP and council of the business. Do I do it when I start to advertise (Facebook initially then probably Etsy), or do I wait until I have my first actual sale? I realise that I may not sell anything for ages, and there's also the possiblity that if I do a craft fair I may sell (if I'm lucky) a fair bit on one day, then maybe nothing else for a while.

I believe I can make a profit of £20 /week and anything over that is taken from the ESA (I doubt I'd reach the limit for taking away carers allowance). Are they flexible about averaging the amount over the weeks? All the guides I have seen seem to assume you already have books for the previous year to use as an income assumption, and there's little information over starting a business that is not really a business, but a hobby that earns a little money.

I just want to make sure I do everything properly, and I'm terrified that my partners ESA might be stopped when I tell them.

[Deleted User]

There are a lot of questions there and a forum might not be the best place to get the answers perhaps a chat with citizens advice would be time well spent?

WillowCat

Thank you. The irony is that I was a CAB adviser up to a couple of years ago but quit partly due to my lack of confidence in their system.

I'm OK about trawling through the legislation and decision makers guides, but I was wondering if anyone had been in a similar situation, claiming means tested benefits and running a hobby business alongside.

If I were still in full time employment it would be easy. I guess I'll just have to suck it and see.

iammumtoone

I can't help with the DWP side of this but if you can wait until April before you start the tax rules are changing you will be able to sell (I think) £1,000 worth of goods before you need to register as a business and fill out self assessment forms. (NOTE: please check this info)

When I looked at doing this when on JSA I remember asking the question and my job coach told me that they take the £20 as amount sold, not profit which meant it could actually cost you more in lost benefits than the profit you make. Again please check this as I didn't investigate it further and job coaches are know for not always having a complete grasp of the rules. Also it may be different with ESA.

Good luck I wish you well. I am considering starting a hobby businesses myself after April when its get easier (i work now so don't have to worry about the benefits side)

NYM

Will this help?

Is Your Hobby a Business?

HMRC follows a number of guidelines called “the badges of trade” that help them reach a conclusion: is a part-time hobby, that creates an income stream, a business that needs to be declared on an annual tax return? These badges of trade are listed below:

An intention to make a profit supports trading, but by itself is not conclusive.
Is the asset of such a type or amount that it can only be turned to advantage by a sale? Or did it yield an income or give ‘pride of possession’, for example, a picture for personal enjoyment?
Transactions that are similar to those of an existing trade may themselves be trading.
Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit?
Was the asset sold in a way that was typical of trading organisations? Alternatively, did it have to be sold to raise cash for an emergency?
Was money borrowed to buy the asset? Could the funds only be repaid by selling the asset?
Assets that are the subject of trade will normally, but not always, be sold quickly. Therefore, an intention to resell an asset shortly after purchase will support trading. However, an asset, which is to be held indefinitely, is much less likely to be a subject of trade.
An asset that is acquired by inheritance, or as a gift, is less likely to be the subject of trade.
These criteria are not the only aspects of activity that will be considered. Please call if you are concerned that your hobby may be considered a trade.

Also, please note that from April 2017, the government is to introduce a new £1,000 allowance for property income and a £1,000 allowance for trading income. Individuals with property income or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance. So, if your hobby does not produce income above £1,000, it can be ignored for tax purposes after 5 April 2017.

benidorm59

My sons partner crafts he is on ESA, they declared the Self Employment as soon as she started, she is not allowed to work at the hobby for more then twenty four hours a week, she supplies accounts every twelve weeks all expenses materials etc tools are ignored what is taken into account is the amount left then after these are deducted, then this is divided by the prescribed time eg twelve weeks then taken into account, so if she earns £240 after all expenses then £20 is the amount taken in, this is under the disregard. Sometimes its twenty six weeks, other times a year for some BDCs.

WillowCat

benidorm59 wrote: »

My sons partner crafts he is on ESA, they declared the Self Employment as soon as she started, she is not allowed to work at the hobby for more then twenty four hours a week, she supplies accounts every twelve weeks all expenses materials etc tools are ignored what is taken into account is the amount left then after these are deducted, then this is divided by the prescribed time eg twelve weeks then taken into account, so if she earns £240 after all expenses then £20 is the amount taken in, this is under the disregard. Sometimes its twenty six weeks, other times a year for some BDCs.

Thanks benidorm, that's exactly the sort of info I've been after. A twelve week 'accounting period' would be easily workable. The twenty four hour rule sounds like it's to keep it in line with employed work as that is the cutoff for ESA. :T:T

Tommo1980

It's up to 16 hours permitted work on ESA.

Tom

WillowCat

Tommo1980 wrote: »

It's up to 16 hours permitted work on ESA.

Tom

Unfortunately I'm not allowed to do permitted work as I am not the ESA claimant. My partner could, I can't. Same issue with disabled element of tax credits - he has to be the worker not me. The fact that he is too disabled to get a job is apparently not relevant!

benidorm59

Permitted work is for the customer only and is up to sixteen hours, the partner on the claim can work up to twenty fours hours go over and the claim shuts down. When you ring up they will send a B16 form for the self employment easy form to fill in, then a SDM will look at it and decided how much to attribute each week after expenses.

Tommo1980

Yeah, sorry my bad. Didn't read full thread.

Tom