I print a magazine as a hobby and sell it on Ebay: Do I need to pay tax?

I self-publish an amateur fan magazine which I sell through subscription and on Ebay. 

I’ve always considered this a hobby rather than a business, as it has never made a profit (and was never intended to).

In the early days, I had to support it financially from my earnings from my day job.  

In recent years it has started to pay for itself, as printing it has become cheaper. But it’s still run as a non-profit operation, especially with the constant rises in postage costs.

I make an amateur fanzine which I sell on Ebay as a hobby – do I need to pay tax on it? 

Any ‘profits’ are invariably fed back into the process, usually in the form of new hardware (I’m on my fourth laptop and about my twentieth printer).

My concern is this: if I declare myself as a small business but consistently show that I am running at either zero profit or even at a loss, will the tax man start to think I’m running some kind of con?

If the fanzine was an actual business proposition it would probably have gone bankrupt years ago, but I’ve propped it up because it was being run as a hobby. Do I need to file a tax return or not? P.W

Angharad Carrick of This Is Money replies: HMRC’s new regulations for online platforms have caused untold confusion for small businesses, so I’m not surprised you’re unclear on what the rules are.

As it stands there is no new ‘side hustle tax’. The rules merely change how online selling platforms report information about their users. 

Platforms like Ebay, Vinted and Etsy will now have to inform HMRC about sellers who make 30 transactions or more in one calendar year.

They will be flagged as a potential trader, meaning they could be liable to pay income tax if they turn over £1,000 or more in a year and register for self-assessment.

Your case is slightly different. I’m unsure how many transactions you make per year, but given it’s a subscription business it will very likely exceed the 30 transaction limit.

Online platforms like Ebay will have to report on users to HMRC from January 2025 

This means HMRC is likely to be informed about your Ebay shop – but that doesn’t necessarily mean you’ll have to pay tax. 

The tax office is looking for ‘online traders’ – people who are making a profit that makes them eligible to pay tax, but failing to declare their earnings.

For businesses that started like yours, it can be difficult to work out whether you’re a trader or hobbyist.

We asked two accountants for their views on what you should do.

Lee Murphy, managing director of The Accountancy Partnership, says: This has been a common question now that platforms are required to report data on their users. 

What has changed is digital platforms like Ebay now need to tell HMRC about what their users are up to, but the tax rules haven’t changed.

Anyone with a hobby only needs to register for self-assessment and start telling HMRC about what they earn if the total untaxed income from their hobby is more than £1,000 in a tax year, which runs from 6 April to 5 April.

That £1,000 threshold amount is called the Trading Allowance. Income is the amount received before tax is paid, or any business expenses are deducted.

If self-employed income for a tax year is more than £1,000 then registering with HMRC and completing a self-assessment is required. But if self-employed income is below £1,000 in a tax year, then registration is not required.

Anybody who needs to register for self-assessment has two choices: they can either claim tax relief on expenses and only pay tax on the profits left once expenses are deducted, or claim the £1,000 Trading Allowance against the total income and pay tax on the amount that is left.

This means, for example, if a hobby has an income of £2,000 with expenses of £500, claiming tax relief on the expenses would mean tax must be paid on £1,500 profit.

But if the trading allowance of £1,000 is chosen, tax will only be paid on £1,000. It is important to know which choice to make to be as tax-efficient as possible.

> Who needs to file a tax return in January?  

Online secondhand clothes sellers are unlikely to have to pay any tax as they sell at a loss

Yogesh Dhanak of the Association of Chartered Certified Accountants, says: If the ‘hobby income’ is turning profits, this is usually taxable under the miscellaneous income tax rules if it is not a fully commercial trading activity – in other words, an activity carried out with a view to making a profit.

There is a tax-free Trading and Miscellaneous Income Allowance of £1,000 that can be taken advantage of if the income is up to this level – and in this case there is no need to inform HMRC.

However, if the income (before any expenses are deducted) is more than this, you should register for self-assessment as a sole trader.

There are also capital allowances available that can be set off against the income for further tax relief – this would apply to the investment in equipment, such as laptops and printers.

HMRC can deny tax relief on losses you incur on a ‘hobby,’ however. So if you are caught under the HMRC tax rules, now might be the time to reconsider the way you run this operation to try and turn it into a fully commercial trading activity. 

This would mean that future losses may be available for relief against your other income.

Reinvesting the profits does not in itself absolve you from reporting to HMRC, so you would have to declare it – but you can take advantage of the tax reliefs on reinvesting into capital equipment.

HMRC would not be bothered about profits (or even losses) until you actually made a claim to set those losses against other income – this is technically known as sideways loss relief.

This is where HMRC would look into the losses and decide whether it is still a ‘hobby’ (in which case there would be no sideways loss relief) or a proper ‘trade’ which does allow loss relief.

Put another way, once you are registered with HMRC you have nothing to worry about with regard to flagging losses. 

But if you don’t register, and the information for business activity comes directly from other sources such as Ebay, then there is a risk of HMRC querying why you haven’t declared. This is of course subject of those trading allowance limits as mentioned earlier.

We would always say it is best to refer to an accountant who can give you tailored advice on your situation.

This post first appeared on Dailymail.co.uk