Side Hustle Tax Question

Simpleg87

I started a side hustle on ebay that has slowly grown over time. Initially it was designed to pay for the hobby (3D printing) and that is really it. Under the new digital tax sharing scheme I have now gone over the threshold for the tax year at which point HMRC/ebay are deeming that my hobby sales are a "business". I have a full time PAYE salary and I am a higher rate (40%) tax payer. My issue is that I never set out to make a lot of money ie costs and actually I have spent about 3x more than I have recovered. I am fully aware of the fact that in my self assessment I can claim costs against this "business" but my issue is that I don't think I will ever make a profit. 

Questions;

how long can I generally post a loss for ? 

What would HMRC do in this instance ? I don't want to be accussed of generating a loss (when I never set out to make money) to offset my PAYE tax bill 

my fundamental problem here is one of principal - I was doing this as a hobby venture to contribute towards my hobby. The fact that I have spent more money than I have made is fine because it is my hobby but those costs are also justified against the ebay listings (for example 3D printers are hundreds of pounds) 

can anyone help me out here - am I going to have to shut up my ebay shop ? I will be utterly dissapointed if this is the case as I enjoy making things for people 

any advice would be appreciated 

Dazed_and_C0nfused

Simpleg87 said:

I started a side hustle on ebay that has slowly grown over time. Initially it was designed to pay for the hobby (3D printing) and that is really it. Under the new digital tax sharing scheme I have now gone over the threshold for the tax year at which point HMRC/ebay are deeming that my hobby sales are a "business". I have a full time PAYE salary and I am a higher rate (40%) tax payer. My issue is that I never set out to make a lot of money ie costs and actually I have spent about 3x more than I have recovered. I am fully aware of the fact that in my self assessment I can claim costs against this "business" but my issue is that I don't think I will ever make a profit. 

Questions;

how long can I generally post a loss for ? 

What would HMRC do in this instance ? I don't want to be accussed of generating a loss (when I never set out to make money) to offset my PAYE tax bill 

my fundamental problem here is one of principal - I was doing this as a hobby venture to contribute towards my hobby. The fact that I have spent more money than I have made is fine because it is my hobby but those costs are also justified against the ebay listings (for example 3D printers are hundreds of pounds) 

can anyone help me out here - am I going to have to shut up my ebay shop ? I will be utterly dissapointed if this is the case as I enjoy making things for people 

any advice would be appreciated 

Why do you think you have to offset the loss against your other income?

No idea if this is totally up to date but you might find this worth a read.

https://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2019/july/loss-relief-options-sole-trader.html

IOWJJBTM2025

I am guessing but assume that you are not registered as a business / self employed at companies house?
Surely you would need to be registered to be able to claim profit and loss?
Also be careful to ensure that your employer is aware and happy. Some employers are not happy with employees having other work.
We buy stuff off ebay. It would be great if I could claim stuff we buy as a loss and get a tax refund?

soolin

IOWJJBTM2025 said:

I am guessing but assume that you are not registered as a business / self employed at companies house?
Surely you would need to be registered to be able to claim profit and loss?
Also be careful to ensure that your employer is aware and happy. Some employers are not happy with employees having other work.
We buy stuff off ebay. It would be great if I could claim stuff we buy as a loss and get a tax refund?

I run a ‘side hustle’ , have done for decades, never registered at companies house as there’s no need, I’m a sole trader. I am registered with HMRC and prepare a self assessment form yearly. 

Savvy_Sue

IOWJJBTM2025 said:

We buy stuff off ebay. It would be great if I could claim stuff we buy as a loss and get a tax refund?

If you are buying things for your business (be that self-employed / sole trader / partnership / ltd co) you can of course claim these as an expense against your business income. If that results in the business operating at a loss, that's noted in your accounts. 

In the OP's case, as this is a newly-registered-with-HMRC business, he is asking about claiming this loss against the tax he pays under PAYE.

It certainly used to be possible - many new businesses don't immediately make a profit.

Simpleg87 said:

I am fully aware of the fact that in my self assessment I can claim costs against this "business" but my issue is that I don't think I will ever make a profit. 

Questions;

how long can I generally post a loss for ? 

That's what I don't know. You could try asking HMRC, or have you tried googling? I wouldn't rely on the latter, but you may find links to more reliable sources. Or, given that you are already a higher rate taxpayer, is it worth speaking to an accountant or two?

I do know that people claiming various income assessed benefits while setting up a new business are deemed to be making enough to pay themselves after a set period. And I don't know what that period is either, sorry ...

Simpleg87

Thanks for the replies so far. I've spent many hours trying to find out the answer on Google to no avail. I think what is confusing me is that I already have to do a self assessment for paying back higher rate child benefits so is the suggestion to undertake a second self assessment tax return for the side hustle and then just file that as a loss and carry that forward? 

What amazes me is there must be alot of people in this situation and yet there seems to be very little guidance for people. Even HMRCs website doesn't help or provide guidance it just tells you about the need to file a tax return for sales on ebay. With the change in implementation rules ie digital sales flagging to HMRC automatically there are thousands of hobby businesses that will need to file their returns. 

I'm not registered as a sole trader other than because it's automatically being sent to hmrc via eBay sales and I'm definitely not listed via companies house. 

The issue to make it clear is - I owe child benefit back as I am a higher rate tax payer so have to fill out the self assessment forms and have an account linked to my national insurance number. Ebay have my national insurance number due to changes in their digital sales system and will have flagged to HMRC that my ebay sales have gone over the threshold for paying tax on profits (except I've generated a loss). Because it's linked to my national insurance number I'm not sure I can post 2 tax returns and therefore it's going to come off my PAYE earnings? 

I also have the issue that I still can't get my head around which is year 1 post a loss and carry that forward... I doubt I will make profit ever and I'm not sure what will happen longer term other than having to stop doing it? 

Simpleg87

Also just to add I'm trying to avoid paying an accountant on the basis that I was doing this as a hobby not a business. If I start having to pay accountants then in my eyes it's definitely turning into something I didn't want it to because I suspect that is going to cost me more money than it would be to just not claim any losses and pay a tax bill for the sales and be done with it which is one potential other option but again trying to avoid it because I do have genuine expenses 

soolin

Just to clarify a couple of things. A 'hobby' business is not a real thing, it is a term used by some to indicate that it is more of something you enjoy doing as a hobby, that also makes you a little money, ie you sell items on. This term is often used by people making jewellery, or customised items, art work etc. Regardless of all that a business is a business, always has been - the new reporting rules change nothing. If you sell on things you have made, or even customised then you are a business and as such would need to declare to HMRC as soon as your total income (turnover) exceeded £1000 in a tax year.

However, reporting doesn't mean a tax liability, the online assessment part on a self assessment form is simple if you stick to a cash basis format. One box for all income, thats everything you get for your sales including postage paid to you by the buyer, the second box is for all expenses, and that includes actual postage you pay out, materials, packaging etc. The difference between the two figures, if it is a profit is then taxable and forms part of your self assessment calculation. 

All you need to find out, possibly via HMRC is whether a loss there will be offset against your PAYE and other income. However you don't 'claim' anything as such, the figures are entered online and the system works out your total liability from all income.

OK that's very simplified and an accountant would be able to explain things better than I ever could.

soolin

Google suggest starting here

HS227 Losses (2024) - GOV.UK

Grumpy_chap

AIUI, there are restrictions on an individual offsetting losses generated from a trade "side-hustle" against their unrelated employed PAYE income.  The losses from the trade "side-hustle" can often only be carried forward against future income from the same trade.

Savvy_Sue

Simpleg87 said:

Also just to add I'm trying to avoid paying an accountant on the basis that I was doing this as a hobby not a business. If I start having to pay accountants then in my eyes it's definitely turning into something I didn't want it to because I suspect that is going to cost me more money than it would be to just not claim any losses and pay a tax bill for the sales and be done with it which is one potential other option but again trying to avoid it because I do have genuine expenses 

Fair enough, but a one-off consultation could still be worth considering, and should if nothing else give reassurance.