Skip to Content

Is your hobby actually a trade?

Is your hobby actually a trade?
Wednesday, December 13, 2017

We’d all love it if our hobbies had the ability to bring us in real money. You might already be buying and selling items on eBay or at car boot sales or offer their skilled services in their spare time.


But when you’re making a profit, at what point does your hobby become a taxable trade?


HMRC Criteria


Unfortunately, there’s no single definition of what actually counts as a business, and there is also no specified allowance that you can earn before you have to register as one. However, if your trading brings in an income over a certain threshold, you may be liable to pay tax on your profits.


“Few people consider the tax implications of selling items through eBay and Amazon, Gumtree and Etsy, and may think it is just a hobby,” says tax specialist at BDO Global, Dawn Register.


“Getting it wrong could involve paying back taxes, late payment interest and penalties to HMRC.”


Buying an item with the aim of selling it for profit is just one of HMRC’s “badges of trade”. These are the criteria used to decide if a hobby is actually a trade. As well as wanting to make a profit, HMRC will look at:

  • The number of transactions you make – Are your sales systematic and repeated, or do they just occur every now and then?
  • The nature of the asset – Did you only own the item you sold because you planned to sell it, or did it previously bring in an income or give you ‘pride of possession’?
  • Any changes to the asset – Were any repairs, modifications or improvements to the item made in order to sell it or sell it for a greater profit?
  • The way the sale was carried out – Was the sale like that of a trading organisation, or simply to raise emergency cash?
  • The source of finance – Did you borrow money to buy the item, and could you only repay the loan by selling the asset?
  • Time between purchase and sale – Did you buy the item with the intention to sell it off quickly, or did you originally plan to keep it?
  • Method of acquisition – Did you buy the item yourself, inherit it, or receive it as a gift?

 HMRC will consider each of these badges of trade when deciding whether or not your hobby should be classed as a business.


In the past, as soon as your hobby was considered a trade, you would have had to notify HMRC of every penny you made from it. Changes to the Trading Allowance in 2017 mean that traders will now have a £1,000 tax free allowance from their “trading activities”.


The Trading Allowance


In the 2016 Budget, the government announced a £1,000 allowance for trading income to take effect the next year. The plan was then dropped from the Finance Act 2017 before the General Election. But, in an attempt to support the "digital and sharing economy", the allowance was reintroduced later in the year in the Finance (No. 2) Bill.


The reinstatement was published in September, but will apply retroactively from when it was initially planned to take effect back in April 2017.


The aim of the new trading allowance is to simplify income tax obligations for those who earn small amounts from selling goods and services.


If your hobby turns over less than £1,000 a year, you will no longer need to pay income tax, register with HMRC, or file any tax returns on your income. You’ll still need to monitor your income levels each year because, if it exceeds the limit at any point, you’ll have to complete a self-assessment. 


Second trades and partial relief


Say you’re a self-employed decorator but tutor maths in your spare time. In this case, your income from both trades would be combined to work out your tax obligations.


If you brought in £501 every year from each business, your total income would be over the £1,000 limit, so you would not be able to claim full relief. You may choose to claim partial relief, effectively deciding to either: 

  • Deduct your actual business expenses from your trading income as you usually would, or
  • Deduct the £1,000 trading allowance from your income. 

You can make this decision on a year-by-year basis, so you can choose what is best for you based on the level of expenses you had in that year.


If you have very few overheads, for example when working as a maths tutor, you may benefit more from the trading allowance. If you have recurring outgoings, for a property or supplies, you might be better off claiming on your actual expenses.


I am a trader – what should I do next?


You need to notify HMRC by the 5th October after the end of the tax year in which you started trading.


So, if you started trading between 6th April 2016 and 5th April  2017, you would have to register your business by 5th October 2018.


You can do this online here, and would need to register for both Income Tax and Class 2 National Insurance Contributions.


If you need to register your hobby as a trade, speak to your accountant at Panthera on 01235 768 561 or email the team at

What our clients say

For us, there is nothing better than a happy customer. Here are just a few that let us know how much we mean to them.

Pete Dungey

Simple, efficient and most importantly, hassle-free.

We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

Pete Dungey Kaleido Grafik Limited
Anita van Eijndhoven

Talk Our Language

The support and service we receive from Panthera Accounting is very good. Everything from regular meetings, a prompt e mail response and the transition of our Xero software (which we find very pro active indeed) has and is all remarkably efficient. We find Panthera talk our language and make any process as painless and easy as possible.

Anita van Eijndhoven Quidne-IT
Ash & Tim Lane

Panthera brush aside the stereotype of the typical accountant

We got in touch with Panthera Accounting by way of a recommendation; we haven't looked anywhere else since. They are an extremely professional yet relaxed group of people. We were slightly daunted by the idea of accountants but Panthera brushed aside y the stereotypes. They are very understanding when answering any questions we may have. They are completely efficient, offer sound business advice, and are fantastically priced. We will continue to recommend them.

Ash & Tim Lane Starveacre Fencing
Jayne Johnson

An Asset to my Business!

The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

Jayne Johnson Better People
John Baker

Absolute joy - they provide a first class service on every level

Working with Tory and the team at Panthera is an absolute joy - they provide a first class service on every level; from simple Xero issues through to more complicated tax enquiries, they’re always on-hand to help me get it right. I’m certainly not their biggest customer, but I’m always made to feel like their most important one.

John Baker BKR Solutions
John Castle

Professional and Friendly

I would like to say that Panthera Accounting have helped me with my business accounts for more than 4 years now. They have consistently offered an excellent competitively priced service that works both professionally and in such a friendly way that I would highly recommend them to everyone considering using their services.

John Castle Ilexanna Limited & Birch Castle Homes Limited
Jonathan Morrison

They are always there to answer queries and sort out issues

I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

Jonathan Morrison Wallingford Builders
Pippa Scott

Professional, friendly and personal service.

Panthera Accounting have gone above and beyond the call of duty to guide and support our Company. They offer a professional, friendly and personal service that can take the stressful and sometimes frightening feelings out of running a business. They have guided us through the working of Xero and have offered “teaching sessions” on the day to day running of the accountancy package. Our only regret is that we didn’t join their team earlier.

Pippa Scott Scott's Commercial Services Limited
Sara Southey

Panthera puts the personal back in to accountancy!

Tory and her team have provided a friendly, approachable and helpful service from the start. They have delivered a quality service, above and beyond anything I could have expected. Panthera, with the help of the Xero package, have taken the stress, strain and confusion out of managing my company and personal accounts. I look forward to working with them for many years to come.

Sara Southey Bluestones Garden Design
Tracey Miller

Panthera are fantastic.

Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

Tracey Miller Bigger, Brighter, Bolder BBB

Contact Us

Panthera will use the details that you have entered into this form to communicate with you on the subject of your message, and for no other purpose.
Please see our privacy policy for more details on how we manage your data.

Lets Get Started

Move to Panthera

Moving to Panthera is as easy as 1,2,3...

  1. We jump on a quick call to create the perfect service package for your business
  2. You e-sign your terms of engagement
  3. We get your authority to talk to HMRC on your behalf

And that’s it! From contacting your previous accountant, to updating Companies House with your new registered office address, let us handle all of the admin so that you can get on with running your business, safe in the knowledge that everything is going smoothly in the background.

Talk to Us