Going from Hobby business to self employed

Denbyas

Could I get W little guidance.
for the past 6m I have been running a small hobby business - under the personal allowance threshold and not needing to be registered as self employed before I am under £1000 profit.

Due to recent contact from some businesses wishing to sell my products, I have decided to become a real business and register as self employed and sold trader in April.

the question I would like to ask is that because I have been selling as a hobby business for the past few months and not being self employed - will this cause any complications in April when I want to register.  I am unsure if the fact I have been trading (despite under the £1000 allowance) it might cause some issues.
Thanks

cannugec5

Interesting question as I’m in the same boat. 

I look forward to seeing some educated replies. 

Just as a point of interest, what is the nature of your hobby/business? 

Mine is making preserves. 

MalMonroe

Hi, as someone also wanting to set up my own business, I have found the information in this link invaluable.  https://www.gov.uk/set-up-business

I also registered as self employed a few months ago. Haven't earned anything from my very small business yet but it doesn't matter. I did have to send in a tax return but as I haven't earned anything yet there's nothing to pay.  HMRC don't care as long as you're not earning above the personal allowance and trying to get away without paying tax. 

Nearlyold

Denbyas said:

Could I get W little guidance.
for the past 6m I have been running a small hobby business - under the personal allowance threshold and not needing to be registered as self employed before I am under £1000 profit.

Due to recent contact from some businesses wishing to sell my products, I have decided to become a real business and register as self employed and sold trader in April.

the question I would like to ask is that because I have been selling as a hobby business for the past few months and not being self employed - will this cause any complications in April when I want to register.  I am unsure if the fact I have been trading (despite under the £1000 allowance) it might cause some issues.
Thanks

The £1,000 Trading Allowance is not based on your profit it's based on your turnover ie your Gross Income before deductions for costs/expenses so if your turnover will be over £1,000 this tax year you need to register anyway. 
If you started your business in the 20/21 Tax Year you are still within the timescale allowed to register -  the latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed. 

Mistral001

I would just register with HMRC and if they ask you when you started trading then tell them the truth.  Start as you mean to continue.   

cannugec5

Nearlyold said:

Denbyas said:

Could I get W little guidance.
for the past 6m I have been running a small hobby business - under the personal allowance threshold and not needing to be registered as self employed before I am under £1000 profit.

Due to recent contact from some businesses wishing to sell my products, I have decided to become a real business and register as self employed and sold trader in April.

the question I would like to ask is that because I have been selling as a hobby business for the past few months and not being self employed - will this cause any complications in April when I want to register.  I am unsure if the fact I have been trading (despite under the £1000 allowance) it might cause some issues.
Thanks

The £1,000 Trading Allowance is not based on your profit it's based on your turnover ie your Gross Income before deductions for costs/expenses so if your turnover will be over £1,000 this tax year you need to register anyway. 
If you started your business in the 20/21 Tax Year you are still within the timescale allowed to register -  the latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed. 

This has floored me. I’ve been onto the HMRC site before and had completely misunderstood it. 

As a result of your post I have just set about registering as a sole trader for self assessment. 

I now need to await the paperwork. 

Thank you! 

Denbyas

Nearlyold said:

Denbyas said:

Could I get W little guidance.
for the past 6m I have been running a small hobby business - under the personal allowance threshold and not needing to be registered as self employed before I am under £1000 profit.

Due to recent contact from some businesses wishing to sell my products, I have decided to become a real business and register as self employed and sold trader in April.

the question I would like to ask is that because I have been selling as a hobby business for the past few months and not being self employed - will this cause any complications in April when I want to register.  I am unsure if the fact I have been trading (despite under the £1000 allowance) it might cause some issues.
Thanks

The £1,000 Trading Allowance is not based on your profit it's based on your turnover ie your Gross Income before deductions for costs/expenses so if your turnover will be over £1,000 this tax year you need to register anyway. 
If you started your business in the 20/21 Tax Year you are still within the timescale allowed to register -  the latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed. 

Thanks so much - I always thought it was profit 🤦‍♀️

The thing I am unsure about is even with the £1000 being gross income, it is still looking unlikely I will hit this before April.

I began at the end of August 20 but I am unsure if this would reset in April 21 since I won’t make the £1000 threshold by then (hopefully that makes sense, I’m terrible at explaining)
the only reason I was looking to register was because quite a few boutiques and stores were wishing to host my products and I could see this increasing my sales quite a bit.

I remember registering as SE in the past that you have 3m from start of business to register - how do you know if your start up will become worth while to register within that timescale.  It’s only the past 2 months when my products finally began gaining traction. 🤔

cannugec5

Denbyas said:

Nearlyold said:

Denbyas said:

Could I get W little guidance.
for the past 6m I have been running a small hobby business - under the personal allowance threshold and not needing to be registered as self employed before I am under £1000 profit.

Due to recent contact from some businesses wishing to sell my products, I have decided to become a real business and register as self employed and sold trader in April.

the question I would like to ask is that because I have been selling as a hobby business for the past few months and not being self employed - will this cause any complications in April when I want to register.  I am unsure if the fact I have been trading (despite under the £1000 allowance) it might cause some issues.
Thanks

The £1,000 Trading Allowance is not based on your profit it's based on your turnover ie your Gross Income before deductions for costs/expenses so if your turnover will be over £1,000 this tax year you need to register anyway. 
If you started your business in the 20/21 Tax Year you are still within the timescale allowed to register -  the latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed. 

the only reason I was looking to register was because quite a few boutiques and stores were wishing to host my products and I could see this increasing my sales quite a bit.

I remember registering as SE in the past that you have 3m from start of business to register - how do you know if your start up will become worth while to register within that timescale.  It’s only the past 2 months when my products finally began gaining traction. 🤔

I registered last night. At some point the form said that you have 2 years from the start of the business or from the time you cease to be exempt  (meaning you have reached that £1000 turnover) to register as sole trader. My small business started in 2017 but it wasn’t until 2019 that it took off and I reached that £1000 turnover. So I am only just in time! ( However I am still well below personal allowance so am not expecting a tax bill ). 

I think the others are correct in suggesting that you just register anyway in anticipation that you will reach the threshold. If you don’t reach it just now you will next year when you are trading a full year.

Denbyas

cannugec5 said:

Denbyas said:

Nearlyold said:

Denbyas said:

Could I get W little guidance.
for the past 6m I have been running a small hobby business - under the personal allowance threshold and not needing to be registered as self employed before I am under £1000 profit.

Due to recent contact from some businesses wishing to sell my products, I have decided to become a real business and register as self employed and sold trader in April.

the question I would like to ask is that because I have been selling as a hobby business for the past few months and not being self employed - will this cause any complications in April when I want to register.  I am unsure if the fact I have been trading (despite under the £1000 allowance) it might cause some issues.
Thanks

The £1,000 Trading Allowance is not based on your profit it's based on your turnover ie your Gross Income before deductions for costs/expenses so if your turnover will be over £1,000 this tax year you need to register anyway. 
If you started your business in the 20/21 Tax Year you are still within the timescale allowed to register -  the latest you can register with HMRC is by 5 October after the end of the tax year during which you became self-employed. 

the only reason I was looking to register was because quite a few boutiques and stores were wishing to host my products and I could see this increasing my sales quite a bit.

I remember registering as SE in the past that you have 3m from start of business to register - how do you know if your start up will become worth while to register within that timescale.  It’s only the past 2 months when my products finally began gaining traction. 🤔

I registered last night. At some point the form said that you have 2 years from the start of the business or from the time you cease to be exempt  (meaning you have reached that £1000 turnover) to register as sole trader. My small business started in 2017 but it wasn’t until 2019 that it took off and I reached that £1000 turnover. So I am only just in time! ( However I am still well below personal allowance so am not expecting a tax bill ). 

I think the others are correct in suggesting that you just register anyway in anticipation that you will reach the threshold. If you don’t reach it just now you will next year when you are trading a full year.

Thank you so much for this information - I must have misread and thought you only had 3m to register 🤭
this makes me feel much better now, I was convinced I was late and about to incur a penalty.  This was only meant to be a tiny job to save my sanity and earn a couple of pound during lockdowns and suddenly over the past month or two, has a lot of attention.
thankfully I’ve saved most of the records of sales and fees but think I’ve lost a few records of post but I can handle losing a few quid.

thank you so much for your advice everyone.  I’m away to go register now and finally be an official business  

cannugec5

@Denbyas I was wondering how you have got on? 

Once I got my registration for self assessment, I was surprised to be asked to complete returns for not one, but 2 years. These were 2018-2019, and 2019-2020. 

I was not liable to pay any tax for either.

However I was all geared up to complete another return on 7th April, (for 2020-2021)  but when I’ve logged on it says I have no more returns to complete. 

I checked again this morning, and there is still nothing. I am worried that I will end up forgetting to keep checking. I had assumed that I would need to complete another return each year until I tell them I’m no longer trading. 

Is it normal for there to be a delay in the availability of online returns for small businesses? I can’t find anything about it on the HMRC Website.

Denbyas

cannugec5 said:

@Denbyas I was wondering how you have got on? 

Once I got my registration for self assessment, I was surprised to be asked to complete returns for not one, but 2 years. These were 2018-2019, and 2019-2020. 

I was not liable to pay any tax for either.

However I was all geared up to complete another return on 7th April, (for 2020-2021)  but when I’ve logged on it says I have no more returns to complete. 

I checked again this morning, and there is still nothing. I am worried that I will end up forgetting to keep checking. I had assumed that I would need to complete another return each year until I tell them I’m no longer trading. 

Is it normal for there to be a delay in the availability of online returns for small businesses? I can’t find anything about it on the HMRC Website.

Hi there,
I ended up registering as self employed “just incase”
ive had a small business before and when it is time to complete your self assessment, they will contact you.

I was told this week by a friend that because of the virus and businesses struggling, that she has extra time to fill out her earnings “because everything is delayed” so I’m unsure how this will affect me.  I’m assuming, I will have some contact around mid year to advise it will need to be completed in October.

I subscribed to quickbooks which had made things simpler though.  I don’t think I’ll be paying too much tax when the time comes, while I’m profiting, it’s not big earnings but it’s good to see what areas I need to work in now I’m building up an audience:)