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 email@example.com