01270 2600959 Ossmere Close, Sandbach, Cheshire CW11 1FBChartered Accountants in Sandbach, Cheshire

Is your hobby really a business?

Is your hobby really a business?

Many businesses start out as hobbies, so at what point does it become a business or trade that means you should register with HMRC as self-employed?

Once a hobby becomes a business you need to keep sufficient business records for your accounts and your self-assessment tax return every year. Penalties maybe incurred if you do not keep adequate records and/or file your return on time.

You do not have to make a profit for HMRC to determine you are in business although the intention to make a profit from your trade or business is one of a number of factors that will be considered.

If you are self-employed you must register as such with HMRC even if there is no tax to pay because the accounts show a loss or a small profit that is covered by your personal allowance.

If you already submit self-assessment tax returns for other reasons you do not have to register separately as self-employed but you must complete the relevant section of your self-assessment tax return for the year that you commence the trade or business.

However if you do not yet complete self-assessment tax returns then self-employment registration with HMRC must be completed by 5th October following the tax year in which the trade or business commenced. For example if you commenced a business in September 2014 then you must be registered as self-employed by 5th October 2015.

Once you have registered you will receive a Unique Taxpayer Reference (UTR) number and a notice to file a tax return.

If you are unsure if you should register as self-employed or need help with your accounts and tax return after registration then please get in touch via info@jclarkeaccountants.co.uk

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