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Do I Register or Pay Tax on a Very Small Business?

By: Rachel Newcombe - Updated: 28 Oct 2010 | comments*Discuss
Tax Self-employed Earnings Hmrc Sell


I have recently been offered some space in a local craft shop to sell a few products.

What do I do about paying tax and registering my business even if the amount I earn could be very small?

(Miss Grace Lamming, 11 February 2009)


Thanks for your question and congratulations for being offered space in a local craft shop to sell your products. It’s always nice to get the chance to earn a bit of money, especially when you’re able to sell your own crafts. But tax issues do have to be taken into consideration, even if you’ll only be earning a small amount.

According to the rules set down by HMRC, everyone is able to earn a certain amount of income each year without paying any tax on it – this is what’s known as a personal allowance. For the year 2008-2009 for under 65-year-olds, this figure is set at £6,035 and for 2009-2010, it will be £6,475. The amount of personal allowance you’re entitled to does vary slightly according to your age and circumstances, so it’s always best to check with HMRC first (pensioners, for example, get better allowances!).

Although this personal allowance means you can earn a certain amount of income each year without paying any tax, you do need to remember that if you’re already working on a full or part-time basis and are paying tax via PAYE, then this allowance is already being taken into account. This means that unless your work salary is under the personal allowance rate, you’ll need to pay tax on any earnings you make that come in on top of your salary from items you sell at the craft shop.

So, depending on what your personal circumstances are and whether you’re already working, it may be necessary for you to register as self-employed, even if you’ll only be selling a small amount of items. In fact, you need to let the Inland Revenue know that you’re selling craft items on a self-employed basis within three months of when you first start doing so, otherwise you could be subject to a fine.

It can be confusing, but registering yourself as self-employed is a relatively straightforward process. As a result, you’ll need to complete a self-assessment tax form each year, but if your earnings are minimal, this shouldn’t be too taxing.

If you need any extra help or advice, then it’s worthwhile contacting the HMRC. If you need help with completing the self-assessment form, then an accountant would be worthwhile – many offer low rates for very small businesses. Good luck with your craft venture!

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