How to make sure your Christmas earnings are tax-compliant
As the festive season approaches, many talented makers are turning their creative skills into a little extra income.
This can range from selling hand-crafted Christmas decorations online to running a weekend market stall.
However, with the rise of side hustles, HM Revenue and Customs (HMRC) has reminded all Christmas crafters to check whether their earnings fall within taxable trading.
What is the £1,000 trading allowance?
Through its Help for Hustles campaign, HMRC is urging anyone earning from festive items to review whether their income exceeds the annual £1,000 trading allowance.
The £1,000 allowance is a tax-free threshold for total trading income in a tax year and should cover all your trading activities combined.
It is based on gross income and if your total exceeds £1,000, you will need to inform HMRC and register as a sole trader.
HMRC also highlights the difference between decluttering and trading, as selling the odd unwanted personal item is generally not taxable.
Activities that do count as trading are:
- Making items specifically to sell for profit
- Running a Christmas market stall
- Regularly selling festive crafts online
- Upcycling furniture or decorations for sale
What to do if you exceed the threshold?
If your festive side hustle brings in more than £1,000 in the 2024/ 2025 tax year, you will need to register for self-assessment as a sole trader.
It is important to file your tax return by 31 January 2026 and pay any tax by that deadline.
HMRC also has a free online checker tool to confirm whether you need to report your additional income.
However, understanding if you will exceed the threshold can be difficult, but with financial help, you can get ahead of your finances and avoid any costly repercussions in the new year.
Why does this matter?
Recent research published 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.
Alongside this, online marketplaces must also now share data with HMRC for sellers hitting certain thresholds.
Our team of accountants can advise you on whether your festive selling counts as taxable trading and make sure your festive fun does not turn into an unexpected tax bill.
For expert financial advice and support, contact our team today.
