Christmas time brings market stalls and homemade gifts to our streets and for many individuals, a creative hobby can turn into a profitable venture.
Whether you sell handmade decorations or personlised gifts, festive crafts can become a side hustle.
With this growth comes the importance of understanding tax and HM Revenue and Customs (HMRC) has provided its guidance on how to stay compliant at Christmas.
What are the tax implications of a side hustle?
When wanting to turn your festive skills into a side hustle, HMRC urges individuals to review if their income exceeds the annual £1,000 trading allowance.
Some of these trading activities can include making items to sell for a profit, running a Christmas market stall, selling festive crafts online and upcycling furniture or decorations for sale.
The trading allowance is based on gross income and it includes all your trading activities combined.
Recent research by HMRC found that one in ten people in the UK work within the hidden economy and are unaware that they should be registered for tax.
It is important to stay financially compliant when trading and seeking financial advice early can help you forecast your finances and plan ahead.
How to register as a sole trader?
If your festive side hustle brings in more than £1,000 in the tax year, you will need to inform HMRC and register for self-assessment as a sole trader.
To confirm whether you need to report your additional income, you can use the HMRC free online checker tool.
From there, you will have to file your tax return by 31 January 2026 and pay any tax by that deadline.
If you are unsure of how to register as a sole trader and manage any potential tax filings, contact an accountant.
How to make sure your side hustle runs smoothly?
The risk of any tax implications can be daunting, but HMRC highlighted the clear difference between decluttering and trading.
The trading allowance is relevant for those who are selling regularly to make a profit, not when an unwanted personal item is sold on a one-off.
Whether your side hustle is just for the holidays or a short period of time, it is important to follow the financial requirements.
Our team of accountants can advise you on whether your festive selling counts as taxable trading and avoid any costly repercussions in the new year.
For expert financial advice and support, contact our team today.
