Etsy selling and 'business' / insurance question...

[cbeadies]

Ok, this is probably a numpty question but I don't seem to be able to get it straight in my mind, I guess someone on here can tell me where to find more information...
...if I open an Etsy shop to sell my own beads / jewellery, do I have to then officially register (with whom?) as a 'business'  for tax purposes etc?
I am not envisaging selling very much (if any!) as this is just a hobby for me so don't really want to get too involved in paperwork, etc unless this is necessary.

Also, do I need insurance as soon as I start selling? A couple of friends and colleagues have asked me to make things, presumably I don't need insurance just for this...or do I??

I am sure these things are all set out somewhere, any advice / info / links appreciated.
Thanks!
Jill x

[Blue Box Studio]

Technically, if you are buying materials to make an end product to sell you are in business. You then register with HMRC, fill in your tax return and everyones happy.  You'd need to register for class 2 but at this stage could apply for an exemption as you are already paying class 1 NI.  Personally, if you are selling I'd get insurance.  Ian Wallace is a reasonable option, I think his basic insurance for public and product liability is about £65 although if you sell to anyone outside of the UK they recommend you take the higher cover which I think costs me £99.  You are meant to tell your home insurers that you are working from home - 4 weeks on I'm struggling to get this sorted for us since Direct Line said everything we discussed last year was a figment of my imagination.  In theory they don't like it, especially if you might have a customer come to the house.  Oh and you should tell your mortgage company if you have one, some have clauses, but I never did.  Tax and NI are your fist ones though IMO.

[cbeadies]

Thanks Sue!
Presumably you don't actually pay any tax on sales until you have a real profit after taking the expense of equipment, materials, insurance etc into account? Which takes a long time in the case of the occasional seller I guess.

Off to have a look at HMRC website to see what there is on there.

[disandland]

Jill, not only don't you pay tax until you've reached the threshold, you actually get a rebate!

[Redkite]

I agree with what's been said already - I went to the Inland Revenue business start-up course and they said that your business starts when you "advertise", so in my case, as yours, that would be the day you opened your Etsy shop.

Registering is very easy and you can offset all sorts of costs against any income you make. If you make a loss in the first couple of years, you will reduce your tax bill if you are also employed or receiving other income!!

You do need to keep good records and fill in a tax return at the end of the year, but it's not much extra work and it keeps everything legal!!

[Blue Box Studio]

No, you don't need to pay tax until you have a profit.  There was a spreadsheet somewhere, think Etsy but will find and send you a link, to work out what your real overheads are.  You can count all your set up, anything that you wouldn't otherwise have if you weren't doing this.  Think you have something like 3 months from start up to tell HMRC.  At the end of your business year, I use the end of the tax year for ease, you fill out a tax return online or by post, give them details of your day job income, your self employment and all sorts of other things andif you've made a loss, which you probably will in the first couple of years if you have much expenditure, you can offset the loss against your day job earnings to reduce your tax bill. There's more to it than sale price less costs = profit, lots oif things you can take into account. I'm sure I'm missing loads of tricks but I claim for use of home as office because I heat my working place, mileage and car costs including servicing and rescue service pro-rata for the number of days I use it, devaluation of tools and shedios, none of these last forever, and your working costs also include something towards replacing your tools.

HTH

[cbeadies]

Registering is very easy and you can offset all sorts of costs against any income you make. If you make a loss in the first couple of years, you will reduce your tax bill if you are also employed or receiving other income!!

I didn't realise that. I am of course taxed on the day job. I can see that if you initially offset all the costs of things like kiln, torch, tools it must take quite a while to be in profit unless you are selling a lot of items, expensive 'hobby' this! (not helped by all the temptation to buy things on here!!  )
Hmm.. I am not sure how many receipts etc I have kept, apart from the larger ones,  must have a good look round for them - tend not to leave them about in case DH notices them all!!  

Thank you for the advice everyone.

[disandland]

Sue, I claim much the same as you.  It was a real eye-opener.  What happened was a sneaky tax official reported us from a craft fair to the local tax office. Luckily, we were kosher and had declared it all anyway.  But the outcome was a one-to-one with a tax business advisor bod.  Said bod explained to Keith all the stuff we could use to offset - she told him that the majority of small business owners don't claim half of their entitlements.

No, you don't need to pay tax until you have a profit.  There was a spreadsheet somewhere, think Etsy but will find and send you a link, to work out what your real overheads are.  You can count all your set up, anything that you wouldn't otherwise have if you weren't doing this.  Think you have something like 3 months from start up to tell HMRC.  At the end of your business year, I use the end of the tax year for ease, you fill out a tax return online or by post, give them details of your day job income, your self employment and all sorts of other things andif you've made a loss, which you probably will in the first couple of years if you have much expenditure, you can offset the loss against your day job earnings to reduce your tax bill. There's more to it than sale price less costs = profit, lots oif things you can take into account. I'm sure I'm missing loads of tricks but I claim for use of home as office because I heat my working place, mileage and car costs including servicing and rescue service pro-rata for the number of days I use it, devaluation of tools and shedios, none of these last forever, and your working costs also include something towards replacing your tools.

HTH

[Galloway Beads]

Sue,  if you find the link for the spreadsheet will you let me know please. Would be interested in looking through it.

Thanks

Elaine x

[Blue Box Studio]

Sue, I claim much the same as you.  It was a real eye-opener.  What happened was a sneaky tax official reported us from a craft fair to the local tax office. Luckily, we were kosher and had declared it all anyway.  But the outcome was a one-to-one with a tax business advisor bod.  Said bod explained to Keith all the stuff we could use to offset - she told him that the majority of small business owners don't claim half of their entitlements.

I got spotted by a social security benefits fraud officer - fortunately I worked in the unemployment benefits office  at the time and had things sorted!  You never know who is watching you.  Having said that I know someone who's visa to stay here ran out years ago, she sells regularly at fairs and no one but no one has ever spotted her despite she doesn't declare a thing or contribute a thing.  OK she's not on benefits, would be a bit of a give away for her, but not a participating member of the proletariat, as my old mum would have said.

I've had a few 1-1s with the tax office and every time they save me more than I'd be charged - I think it's the Fox's Ginger crunch biscuits that sway it.

[Blue Box Studio]

Sue,  if you find the link for the spreadsheet will you let me know please. Would be interested in looking through it.

Thanks

Elaine x

Can't find the link but have found the spreadsheets on my computer.  If you PM your email address I'll attach and send to you - don't think I can attach files to PMs.  Hopefully they'll help a bit.