Curious tax question to those selling prints

[hexham]

I was wondering if you declare income and pay tax appropriately? I currently sell prints for a little profit which basically covers costs of actually getting to where I'm selling them in the first place, and on a good day I'll make a little bit of money. I was wondering if I still should declare this as income? Generally I'll only go somewhere and sell if it's a place I'm genuinely interested in going or it's fairly local. Should I be worrying about paying taxes on it? According to this income tax calculator I'd pay 40% tax on any income from this, which is a decent chunk of it, which is why i was curious as to whether people making pounds here and there in profit would bother declaring it.

Thanks!

 

[BMbikerider]

If Revenue and Customs get their teeth and claws into you they rarely let go. To be honest with them is a good line to take. 'Phone them and ask their advice verbally over the 'phone is the best answer. If it is a minuscule amount they may well say they are not very interested, but be guided by them. They will possibly be impressed by honesty.
.
Some years ago I found myself with an unexpected tax bill (Not my fault) and I first 'phoned them up to find out what it was all about, then made a personal visit to my tax office and found they could not have been nicer. After clearing up ambiguities, the amount they were asking for was almost halved and the remainder was paid off in installments over 3 years (Interest free). So if the amount is small, presumably at 20%, make sure you have your expenditure all tabled out, materials, travel costs etc this will make it a lot easier and if the amounts level
out you may not have to pay anything.

Bear in mind if anything is 'dubious', or if they think you are trying to hide anything, they can look back over 5 years and do quite a deep forensic check to see if you have been less than upfront with them.

No doubt there will be others who reply to the question and be minded some of those may not reside in UK, so any advice my not actually comply with UK tax law.

 

[hexham]

If Revenue and Customs get their teeth and claws into you they rarely let go.

I've heard some quite vicious stories about them which is the reason for my concern. I will certainly have a look at collecting all expenditure, I already keep receipts for photography-related sales/purchases so hopefully shouldn't be much effort to sort all that out.

I'll take a look at giving them a call, would be interesting to see what they have to say. Thanks for the advice!

 

[tezzasmall]

If you are really only making a small profit, if you do the paperwork and keep the receipts, you might actually find that you are running at a loss at the moment. With other main income, any loss from the photo side would be taken off of your tax amount due if you fill in extra 'paperwork' - and by the way, it is much more straightforward than it used to be with a wad of paper coming through your letterbox to fill in.

So yeah, I would make a phone call just to check. Better safe than sorry as they prefer to check the smaller fry to the bigger fish.

Terry S

 

[hexham]

With other main income, any loss from the photo side would be taken off of your tax amount due if you fill in extra 'paperwork'

Can I do that even though I'm not doing this as a business? I wasn't aware I could claim losses like that, interesting!

 

[rpavich]

Can I do that even though I'm not doing this as a business? I wasn't aware I could claim losses like that, interesting!

When you sell something that you've created to another human being isn't that being a business?

 

[hexham]

When you sell something that you've created to another human being isn't that being a business?

My statement is a bit unclear - as a registered business

 

[rpavich]

My statement is a bit unclear - as a registered business

IF it's anything like the US, registered or not, once you sell something, you claim income. Period.

 

[tezzasmall]

Can I do that even though I'm not doing this as a business? I wasn't aware I could claim losses like that, interesting!

As I said, 'With other main income, any loss from the photo side would be taken off of your tax amount due if you fill in extra 'paperwork' i.e. declaring income and loss from another business you run.

Terry S

 

[nmp]

Here in the US, you can declare photography as a hobby and any income you make from sales can be counted against expenses (all, not just what goes into making the particular print) for that year. As long as your expenses are greater, no tax is owed.

 

[Steve Roberts]

Personally, though I do occasionally sell material, I'd be hard-pressed to demonstrate any profit. By the time I've totted up the cost of materials, equipment, transport, etc. I only at best subsidise my photography from any sales. Of course, the VAT man would insist on proof of this if anything was brought to his attention and, as someone has said, once you're on the tax man's radar it can be hard to shake him off. You say you make "a little bit of money" on a good day. Without knowing how you define "a little bit" it's hard to have an opinion as to whether you should declare it or not - Richard Branson's idea of "a little bit" is probably somewhat different to mine!
Steve

 

[Pieter12]

Here in the US, you can declare photography as a hobby and any income you make from sales can be counted against expenses (all, not just what goes into making the particular print) for that year. As long as your expenses are greater, no tax is owed.

Sorry. I 'm pretty sure that's not how it works in the US. You cannot declare expenses against a hobby. If you want to write off expenses, you must declare business income. If you have a loss (or no profit) for a number of years in a row, the IRS will deem your "business" as a hobby and deny any write-offs. Unless you're incorporated, then you can get away with just about anything.

 

[eddie]

Sorry. I 'm pretty sure that's not how it works in the US. You cannot declare expenses against a hobby. If you want to write off expenses, you must declare business income. If you have a loss (or no profit) for a number of years in a row, the IRS will deem your "business" as a hobby and deny any write-offs. Unless you're incorporated, then you can get away with just about anything.

Yes. You can't expense a hobby. It must be a business, and you must file a Schedule C. I believe you need to show a profit in 3 out of 5 years.

 

[MattKing]

I'm fairly sure Photrio isn't the best place to look for advice on this.
In Canada, the best advice would be to check the web information provided by the Canada Revenue Agency, and to seek advice from a small business accountant. The telephone assistance offered by the CRA is relatively poor, and they no longer have offices where you can go to ask questions. (If they want to meet with you, they make an appointment with you, and you either meet at your location, or in their secured facilities).
I ran a small, unincorporated photography business for many years in Canada. It had both advantages and disadvantages. I had to register and collect and remit sales taxes, but in some cases (e.g. photofinishing) I was able to buy without paying sales tax. Since then, our version of VAT has come in, so if I was still doing this I would have to register, collect and remit two different taxes (with different rates and rules).
When I was doing this, many of the suppliers would use my tax registration as criteria for offering me "trade" pricing and services. In those days that was a real advantage.
I had to set up and maintain simple business accounting records. And then I had to use those records to fill out the applicable forms when I completed my annual personal income tax return, and either pay income tax on the net income or, in a couple of cases, take the benefit of a small loss to reduce my taxes.
The complexity I always struggled with was how to deal with the purchase of equipment. Technically, when you acquire equipment in a business you are supposed to treat it as a capital asset. You aren't supposed to treat the cost as a deductible expense, but rather you are supposed to amortize that expense over several years. That leads to much more complex accounting records.
One benefit of doing all this extra paperwork is that when you actually organize and track the information, you can learn a lot about your own circumstances .
All of my experiece is, of course, only marginally useful to the OP because of the difference in jurisdictions and the fact that it is somewhat dated.
One thing though - in my jurisdiction, if my marginal tax rate is 40%, than I have fairly high income, and fairly meaningful tax obligations. When that is the case, it is generally money well spent to pay for experienced and informed accounting advice.
Hope this helps a bit.

 

[nmp]

Sorry. I 'm pretty sure that's not how it works in the US. You cannot declare expenses against a hobby. If you want to write off expenses, you must declare business income. If you have a loss (or no profit) for a number of years in a row, the IRS will deem your "business" as a hobby and deny any write-offs. Unless you're incorporated, then you can get away with just about anything.

https://www.irs.gov/newsroom/five-things-to-remember-about-hobby-income-and-expenses

If you make X in selling your art, you can claim that as a hobby income. Against that you can deduct (caveat: in Itemized Deductions only) an amount up to but not over X as expense (if you have a record.) So no income tax is paid on that occasional print one sells for $50. Granted if you want to take losses, this has to be declared as a business. Also if the activity becomes significant, then the hobby can be deemed as a business as per the criteria:

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

Apparently before you could get away with hobby losses for a while before they would have flagged you to start showing profit. With the new tax law, that possibility is removed.

 

[BMbikerider]

As I said in my initial post. The tax laws in UK and elsewhere can be and are totally different. It is irrelevant if you are in a business, registered or not,or simply making money from your hobby, if you make a profit from selling anything you are tax liable. It is down to the Tax Inspector to make a decision how much, if anything, you are liable for. Guessing what you may have to pay in the USA, Canada, or indeed elsewhere, is not good advice about the question asked.

As an example of a non registered business income:- If I rent a house which is my normal home, because I am abroad for a while, Any rent received will mean I am liable for £20% tax on the income generated. Less any expenses which are incurred during that period. - Repairs, decoration, etc. Even in some cases legal expenses too.

However this is way beyond what 'Hexham' was asking, but it is the same principal.

 

[Sirius Glass]

Ask your tax preparer. It varies by country and exact circumstance. As Matt stated, this is not the place to seek your answer.

 

[BMbikerider]

We don't have a 'tax preparer' in the UK. It is usually an accountant if you are running a business or then self assessment on the paperwork (Or on line as required by HMRC'. Using an accountant for a small amount such as Hexham has stated would not justify the cost and he would finish up out of pocket.

 

[removed account4]

you are lucky where you live it is only 40% LOL after i am all done its just about 50%
but at least i get services, you know mail delivered, street lights, streets swept and DWB.