Could your Christmas side hustle land you with a tax bill?

HMRC has reminded Christmas crafters that even small-scale festive selling could mean you need to report your earnings for tax purposes. 

As we head into the festive season, thousands of folks are busy becoming holiday entrepreneurs – whipping up Christmas decorations, upcycling furniture or running stalls that smell delightfully of mulled wine.

However, your festive earnings could mean you have to report the income to the tax office. To help prevent taxpayers from receiving an unwelcome new year's notice, the HMRC has launched its campaign ‘Help for Hustles’, which provides taxpayers with guidance on how to manage their tax and earnings. 

Here, Which? explains the main difference between a tax-free hobby and actual, profit-making trading. Plus, we outline when you need to pay tax and how to do so. 

When side-hustle income becomes taxable

The key question for crafters and small sellers is often ‘When do I need to pay tax?’ This depends on whether HMRC views your activity as casual selling or trading.

Selling personal items you already own – such as second-hand clothes or household goods – is generally treated as disposing of personal possessions, not trading, so this income is normally outside income tax.

However, if you’re making goods to sell, buying items specifically to resell or attending Christmas markets with products you’ve created, HMRC is more likely to see this as trading. Regular activity, an intention to make money and a more organised approach are all factors HMRC considers.

If what you’re doing amounts to trading, you may need to declare the income and pay tax on any profit.

• Find out more: how to fill in a self-assessment tax return

How the £1,000 trading allowance works

If your activity falls within trading rules, the next step is to look at the trading allowance. 

In the UK, you can earn £1,000 in additional income each tax year (6 April to 5 April) alongside your regular job – this is known as your trading allowance. 

If your total earnings from all side hustles stay under £1,000 in a tax year, you usually don’t need to do anything. 

If your combined earnings exceed £1,000, you’ll usually need to register as self-employed and complete a self-assessment tax return, unless you already file a return for another reason. HMRC warns that not reporting taxable income can lead to penalties and interest charges.

A key point here is that the allowance covers everything you earn from all your side hustles combined, not just one. If you have multiple side hustles, you won't get a separate trading allowance for each one. 

Digital platforms such as eBay and Vinted must also now report data on certain sellers. Under rules introduced in 2024, platforms must share information with HMRC if a seller makes 30 or more sales and receives more than around £1,700 in a year. 

HMRC says this doesn’t change what taxpayers need to do, but may make it easier for the tax office to monitor compliance. 

You can use a free online checker on Gov.uk to find out if you need to tell HMRC about additional income.

• Find out more: tax free income and allowances 

How to register if you go over £1,000

If your crafting or festive sales take you past the limit this year, you’ll need to register for self-assessment.

Under the current rules, you must register with HMRC by 5 October following the end of your second tax year of trading. For example, if you began trading in May 2025, you must register by 5 October 2026. However, if you started earlier, in February 2025, your deadline is 5 October 2025.

If you receive a notice from HMRC to complete a self-assessment return, you must register even if you haven't reached the £1,000 threshold.

You can submit your registration online, by phone or by post.

If you’ve never filed before, you can use HMRC’s online registration service for self-employment. The tax office will then send you a unique taxpayer reference (UTR) and an activation code for your online tax account.

Going forward, you are then responsible for filing tax returns, paying tax and National Insurance contributions (NICs) and maintaining accurate business records.

• Find out more: how to calculate your tax bill

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Top tips for crafters this Christmas

For those planning to make some money this Christmas, here are a few tips to help you keep track of your tax affairs. 

• Keep track of your sales: This helps you calculate your total gross income accurately. You’ll need this to check if you've exceeded the £1,000 trading allowance. Detailed records also make it easier to declare your income if you do need to file a self-assessment tax return later.
• Deduct your costs: When you file a tax return, you pay tax only on your profit, not your total sales. Your profit is calculated by subtracting your allowed business expenses (such as materials, market stall fees and postage) from your income. Tracking these costs allows you to reduce your taxable income and make sure you pay only what you owe.
• Register early: If you believe you're going to hit the trading allowance after your first full tax year of trading, then you might as will register for self-assessment sooner rather than later. By registering early, you eliminate the stress you could feel by leaving it closer to the 5 October deadline. Plus, it will help you avoid potential late-registration penalties from HMRC.
• Keep your records safe: HMRC requires business records such as invoices, receipts and sales logs to be kept for at least five years after the 31 January submission deadline for the relevant tax year. Keeping them in an organised safe space will help you easily reference them for current or future returns. It can also be used as evidence in case HMRC ever opens an inquiry.

Find out more: online tax returns explained