Hobby or business?

[Lons]

I am no longer providing accounting advice as part of my own tax avoidance scheme. Avoiding taking my income above the higher rate tax threshold.

Seriously, I have been retired and out of touch with changes to tax law for too long now to offer up to date advice. Needless to say when it comes to collecting money the Government and HMRC have plenty of advice on line. This is a good place to start:

Working for yourself - GOV.UK

Awe bo**cks Walter does that mean no referral fees? Skinflint!

 

[Penpal]

How is this for a summary.

Person buys a lathe, then tools, chooses what to turn.

Hang on those pens look interesting, I like bowls.

Exhibit the results to family, friends by the way remarks you should sell them.

You buy more become pressured by the other half to at least break even, do you think wwe are made of money.

Take the plunge sell a few, soak up the admiration.

Now you are hooked.

Which way to go, Legal or Undercover..................Situation normal.

Peter.

 

[hawkeyefxr]

The way i see it is, a hobby is a happy time where you enjoy what you are doing, when it becomes your business it ceases to be a happy time. You have deadlines to meet, item to produce which must be done for your living.
I would say of course if you can make a hundred grand profit in a year good on you.

I like my hobby (i'm retired), i go to the shed when i want to and stop when i want to.I like being i the shed, the smell of woody stuff mmmmm.
I have been self employed in the long distant past and have been PAYE and i liked all my jobs, a lot but work is work and fun is fun.
My jaundiced look on it

 

[stiofanpadraigcrafts]

Thank you for all the information and advice supplied. It means a lot and another one of the reasons why i love this forum.

 

[wm460]

the smell of woody stuff mmmmm.

Sniffing wood now, thats bad.
Must be the company you are keeping here now leading you astray

 

[silver]

Some very interesting "quotes" to say the least.

On the start of this thread says hobby or business..

The point when you sell any item, then that becomes a personal gain that is taxable in the eyes on HMRC. It's not a hobby it's financial gain.

See the links below if you are thinking any different and believe your hobby is not making any money..

Even if you plough all your profits back in to your hobby then you are increasing your net worth and have the investment to sell on at a later date.

Now the taxman targets sellers on eBay and Amazon who make profits as small as PS100 | Daily Mail Online

HMRC targets Etsy, eBay and Gumtree sellers – but when is your hobby taxable? - Telegraph

The link Melanie has provided tells you all you need to know, but in practice unless you are selling hundreds of pens you will be making a loss after all expenses are taken into account.

Few hobby pen makers need worry about the taxman. He has bigger fish to fry.

Trust me, I am an accountant.

I agree with the "making a loss" but when HMRC knock on the door they will only be interested in what money has come in to your account. Not what has gone out to finance the making of the items you have sold.

If you register then you can clearly show profit and loss in advance and you are hiding nothing from them.

If you have not been registered for self assessment before don't forget everything you buy to make your pens can be offset against your tax. If you use cotton buds, paper towels, glue, envelopes, sellotape, lathes, tools etc. etc. etc. they can all be offset against your tax, even accountancy fees if you are wise enough to use an accountant, don't be frightened of it, just be thorough.

Peter

I totally agree Peter, but as stated above in the reply to Walter, if they come knocking they are will be only interested in what profit you have made. That includes any equipment, tools and any stock you have gained from the sales of your "hobby"

Don't believe that it's a hobby, as soon as you take the well earned wedge off a customer then you have crossed the Barrier and are now selling and making money from the items you have made..

It's regardless if you have even made them for a charity, donated goods need to be identified and clear that is where they have gone.

One word from me is it makes no difference.

Retired, state pension, company pension, Disability benefits, low tax bracket or high tax bracket. You need to do a self assessment.

If you buy in goods to turn in to a sellable item and then sell it, you are then at the mercy of the tax man, declare it..
Then it's not a hobby

 

[Penpal]

In Australia when I was in business the Sales Tax Law was a large volume just full of legal explanations. Came the day when a taxman turned up at my door, sure got upset when I told him to make an appointment. He demanded I close the door he was ready now with instructions to find a particular percentage.

After an exchange , my phone call to his head office, we made an appointment in the near future to suit me. You can bet by now he was all fired up but the good news was he failed miserably,all was in order.

The reason I mention this was simple bookkeeping paid off, receipts kept in order. In my twenty years of retirement I have no intention ever of rocking the boat by turning pens as a business, what we have been talking about is using common sense.

Peter.