Only if your income from sales exceeds £1,000 in a tax year. This is the current trading allowance threshold, and it applies whether you’re selling at craft fairs, on Etsy, or through your own website. Below £1,000 you don’t need to register or declare it; above that, you do. Even if it started as a hobby.

Registration means signing up for Self Assessment with HMRC - it is not the same process as registering a limited company.

Anything used wholly for business purposes is deductible. For makers, this typically includes materials (yarn, clay, fabric, beads), tools and equipment, packaging and postage, Etsy/marketplace listing and payment fees, and craft fair or market stall costs.

Where something is used for both personal and business purposes (like your phone or a room used as a studio), you split the cost to reflect the business share only.

There are some items such as use of vehicles or working from home where there are simplified options rather than calculating the exact cost of these things.

Also note that you cannot claim expenses if you are using your £1000 trading allowance.

If there is any doubt, contact your accountant.

Start with your total cost of goods ( materials plus a fair hourly rate for your own time) then add your margin on top.

The most common pricing mistake makers make is leaving their own labour out of the calculation, which means the “profit” they think they’re making is really just unpaid time.

You could also allow for some non-billable time in your calculations, for things like business admin, social media/marketing, etc.

Check out the free resource on pricing for a rough guide.

Turnover is all the income you have taken in sales. Every market, every Etsy order.

Profit is what’s left once materials, fees, postage, and other costs are deducted.

A busy stall at a Christmas market can have high turnover and almost no profit if costs aren’t tracked properly.

Yes. If your profit is over £12,570 a year you’ll pay Class 4 National Insurance, currently 6% up to £50,270 and 2% above that.

If your profit is under £7,105, you can choose to pay voluntary Class 2 contributions (currently £3.65 a week) to protect your State Pension record (useful for seasonal makers whose income fluctuates year to year).

You need a complete NI record to be able to claim state benefits such as the state pension, so it is worth doing this if your profit drops below this level.

A good rule of thumb is 20-30% of income, set aside as you’re paid rather than at year-end.

For seasonal sellers with heavy Christmas and summer market months, quieter periods between, this matters even more. It’s tempting to spend a strong December’s takings without putting tax money aside first.

Remember that if your previous year tax due was more than £1,000 then you will be required to make payments on account (January & July) rather than just in one go.

If your taxable turnover passes £90,000 in any rolling 12-month period, you must register within 30 days.

You can also register voluntarily below that threshold (some makers do this to reclaim VAT on materials, particularly if they’re buying a lot of raw stock wholesale).

There are other VAT schemes in place so it may be worth speaking to your accountant to see which one will work best for your business or alternatively get in touch to discuss options.

Track your cash position month by month, not just at year-end, so you can see the quiet months coming and plan for them.

Build a buffer from your Christmas and peak-season sales to cover the leaner months rather than treating each month’s takings as spendable.

A simple spreadsheet tracking incomings and outgoings month by month is often enough (you don’t need specialist software to start).

Yes, since 2024, digital platforms including Etsy and Folksy are required to report seller information to HMRC if you make more than 30 sales or earn over roughly €2,000 (about £1,700) through the platform in a year.

This doesn’t create a new tax, it just means HMRC now sees the same sales data you should already be declaring.

If you are selling at these levels you should have already registered for self assessment tax returns.

As a sole trader, keep records for at least 5 years after the 31 January submission deadline for the relevant tax year.

If you’re trading as a limited company, it’s 6 years.

Keep digital copies of receipts from markets and online sales alike (paper receipts from a busy stall day are easy to lose).

You do not need to send this information to HMRC but if they decide to check up on you, you will need to be able to provide evidence of the stated transactions.

There’s no single right answer, it depends on your profit level, growth plans, and how much personal liability protection matters to you.

Many craft businesses start as sole traders and switch to a limited company once profits reach a level where it becomes more tax-efficient to do so; this is worth a direct conversation with your accountant rather than a generic rule of thumb.

The key differences will be in the liability, the setup and reporting requirements.

Sole traders are personally liable for the debts of the business whereas a limited company acts as a separate entity with the owner as a director. There are annual requirements to fulfil with Companies House which will need to be considered.

However, there is a point where it becomes more tax-efficient to pay taxes through a company than as a sole trader.

Get in touch to discuss more.