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If you start working for yourself you may ask the question do I need to register with the HMRC?
If you’re selling goods or providing a service earning money then you are classed as a sole trader and are self-employed. You will need to register with the HMRC if your gross income is over £1000.
If you’re just selling unwanted items occasionally on eBay or social selling sites, or blogging and not profiting from it then you won’t need to register.
If you’re not sure whether you are trading you can contact the HMRC and ask or check online.
Annual Tax Allowance For Trading
HMRC now have a £1000 annual tax allowance for trading which is for those who make small amounts of money. The £1000 is based on your GROSS income, this is the amount you receive BEFORE deducting costs and expenses.
Your annual income must be £1000 or less and you are not currently registered for self-assessment and do not submit a tax return. If this applies to you then you don’t need to register or tell the HMRC about your income.
You will still need to keep and store records of your money to demonstrate that it is below the £1000 threshold should the HMRC request the information.
Once your Gross income exceeds £1000 then you will need to register for self-assessment by 5 October in the business’ second tax year.
Online Accounting Software
A good way of keeping everything in order and to work out your profit or loss is using online accounting software. I use FreeAgent and have written a post where you can read all about FreeAgent and the good service they provide.
I’m not an accountant but have been self-employed working online for some years now. If you have any questions please add them in the comments below and I’ll do my best to answer them and guide you in the right direction.