Etsy or craft fairs: hobby or business?
Buying goods from China intending to resell for profit is probably trading, even with a small batch. Check your combined gross trading income against the £1,000 allowance, then check exceptions and Self Assessment obligations. For sourcing and factory checks, speak to Cambridge China Bridge.
Start with why you bought the goods
HMRC’s online-selling guidance says goods bought intending to sell for profit probably indicate trading. Calling the activity a hobby does not settle the question. Write down why you ordered the stock, how you intend to price it and whether you plan to replenish it. Keep personal clear-outs separate from stock bought for resale.
Use HMRC’s guidance as a checklist
Read HMRC’s Working for yourself page, especially its selling-goods and running-a-business sections. Compare the indicators with your actual activity rather than your preferred label. You can run a business alongside employment. If the position remains unclear, contact HMRC with your purchase purpose, sales pattern and records. For the separate importing question, see importing as a sole trader.
Count income before costs
Combine Etsy, craft-fair and other trading income for the tax year, from 6 April to 5 April. Gross income is measured before expenses, so do not test the allowance against profit or a payout after fees. Above £1,000, register for Self Assessment by 5 October in the following tax year. Below or at the allowance, check HMRC’s exceptions before deciding you need not report.
Choose the allowance or expenses
The allowance replaces expense deductions; you cannot claim both. Compare it with your allowable costs before choosing. Check HMRC’s eligibility exclusions, particularly income from an employer or a connected company or partnership. Keep income records even when using the allowance. Save sales statements, cash-sale notes and supplier invoices together so an accountant can review the position.
Prepare the purchase separately
Use the first China order checklist to prepare the specification, sample approval and shipment arrangements. Treat VAT as a separate check using importing when not VAT registered. Ask Cambridge China Bridge’s staff in China to check the supplier and clarify the product specification; take tax classification and allowance questions to HMRC or your accountant.
Frequently asked questions
Is a small Etsy order from China just a hobby?
Not automatically. HMRC says selling goods bought intending to resell for profit probably means trading. Record your purpose and check its guidance against your activity.
Is the £1,000 trading allowance based on profit?
No. Check gross trading income before expenses, combining your trading activities rather than treating Etsy and craft fairs separately.
Can I deduct stock costs and claim the allowance?
You cannot deduct expenses as well as claim the trading allowance. Compare the allowance with allowable expenses before choosing.
Do I need a limited company to import stock?
Check with HMRC or your customs broker about importing as a sole trader. Use the importing guide to prepare questions about customs arrangements and the responsibilities you would carry personally.