It’s certainly been an interesting 12 months, with the global covid pandemic that has affected us all.
Many staff members may have experienced what it is like to be furloughed, and many business owners have had to review their situation in depth to ensure that they are able to continue.
This had led to a growth in small business startups, individuals and groups of like-minded people getting together to start a new project.
One of the main elements that has to be considered is gaining momentum, and keeping it going.
An idea is great, once written down it becomes a little more real, and once shared it then starts to take on it’s own life.
With anything, new habits etc. only work where there is some motion, forwards, backwards, sideways. Once stopped, the project may take longer to restart, and opportunities may be missed.
One positive element in this new project is that it is likely to have come from a passion of yours, and therefore if you can earn some money from it, then it is a larger win.
Hobby versus Business
HMRC have a series of questions, known as HMRC Badges of Trade, that determine whether your hobby has become a business for tax purposes.
If you answer yes to any of these questions, then it is likely that your hobby has become a business:
- Do you regularly sell a product or service to make an income?
- Do you make items to sell on at a profit?
- Have you registered as business on Etsy, eBay, or Amazon?
- Do you buy stock to hold onto?
- Do you plan to increase your income from your hobby?
- Do you have a website or a social media page where you market your product or service?
- Do you buy items at wholesale to sell on for a profit?
- Are you working towards creating a brand?
If you have created a trade, then you may have to register with HMRC to notify them of your earnings, This is self-assessment and more commonly known as the personal tax return.
The threshold before having to register is £1,000 in sales, before any expenses. This is per tax year, so if you are only making £500 in any tear, then you will not need to register.
Tax returns run between the periods 6th April to 5th April, and there are two deadlines to be mindful of, 31st October is the deadline for filing your return by paper, and 31st January which is the deadline for online digital filing, and also the tax payments.
Link to register for self-assessment here –
Or get in touch.