Business Hobby & Tax

hivoodoodoll

Last year I took a career break which turned into voluntary severance and I have been lucky enough to have nearly a year off work. During this time I have started to sell craft items on Etsy and through two local shops where I live. To do this I have had to take out public liability insurance but I am only really covering my costs and making a minimal amount on top. I originally put £1000 in a separate bank account to use for expenditures and profits. 

My concern has always been at what point do I pay tax and I believe it is if I earn anything over £1000 within the tax year. As far as paying tax goes if I spend £1200 on the space over the year but only make £1800 would I need to pay tax on the £1800 or would that only kick in if I went over £2200? I hope that makes sense.

macman

You need to register as self employed once your turnover exceeds £1,000 in the tax year. You pay tax on your business profits, i.e. sales minus allowable expenses.
Whether you pay tax will depend on your other income, if any, You have a personal allowance of £12,570 in 22/23.

soolin

As above the requirement to register with HMRC and the actual need to pay tax are separate things. You do need to register but will only be taxed on any income after expenses , which assuming you have personal allowances unused could well mean not paying any tax at all. 

hivoodoodoll

Yes I have my personal allowance as have had no other income coming in. I will look into registering with HMRC. 

Dazed_and_C0nfused

Registering as self employed and completing Self Assessment returns opens up the opportunity to pay voluntary Class 2 NI which is a very cheap way of accruing additional qualifying years for the new State Pension.

Probably worth checking your forecast (read it in full, not the headline figure) on gov.uk to see if this could be beneficial for you.

LessImpecunious

Dazed_and_C0nfused said:

Registering as self employed and completing Self Assessment returns opens up the opportunity to pay voluntary Class 2 NI which is a very cheap way of accruing additional qualifying years for the new State Pension.

Probably worth checking your forecast (read it in full, not the headline figure) on gov.uk to see if this could be beneficial for you.

If you're thinking of doing this (which is definitely a good idea if you're in that position), first read the full MSE guide on the topic and contact the pensions helpline direct (can't remember the exact name or details - but it's in the guide) as only they can tell you exactly what is beneficial or not to pay...