Crafts people/artists and tax credits

[AndThisIsTrue]

I am currently a SAHM and am looking into selling my art work which is currently a hobby to try and make a bit of extra money. I just wondered how would this work for claiming tax credits? Do I just give an estimate of how many hours I think I will do? What if I don't earn much money will they think it isn't proper work and say we have to pay tax credits back? I am concerned as to how I would prove how many hours I spend painting or whatever, do you keep note of things like this? Thanks.

You have three months to register with HMRC so give it a go. If you make a few sales then start the ball rolling in putting everything in place.

Good luck!

THe self employed only get tax credits if they are earning above the threshold
which is 16 hours per week at NMW net profit averaged over 6 months.

Tax credits are no longer available to supplement hobby businesses

So you need to clear £104 profit per week before you can get the taxpayer to top it up.

I have never heard that Talking, is that to do with the new universal credit thing?

It was brought in ready for the Universal credit but started applying last April
the joyous details of the manual are here
www.hmrc.gov.uk/manuals/ccmmanual/CCM6000.htm

It is perfectly reasonable that tax credits are not used to support people who are not actually working to make a living

Ah, OP

If you had got in last year you'd have been fine as it goes on last years books.
I think if you start your business though and it goes well, you will probably make enough to get top ups.
Don't forget your hours are anything at all to do with running your business not just the actual product you are making.
Include marketing, finance, research and development, answering queries etc.

Do you have to already have proof of 6 months nmw worthy profit behind you to claim then? or is it just that if you don't earn the minimum amount you have to pay it back?

I'm hoping to go self employed next summer and was hoping I could use tax credits to help bridge the gap between starting work and getting payment - but might need to start a bit earlier.

From my reading of the manual

• you can estimate your income at startup BUT they will check against your tax return

and demand that you repay if you do not make enough to cover the rules

TBH if your trade is not going to make £104 a week net, its not a business and should not be propped up at the expense of the rest of us.

I run a business - I employ 10 staff - I don't receive that much income from it, so I'll close it down & make everyone redundant so they can claim too

But I don't know many start ups that are consistently making a profit from day 1 either - so I just wanted to check if this meant that only established self employed people are allowed to claim now.

I'm not sure the £104 rule will always be true? For example if you are applying for the 30 hours working tax credits amount, then I think you'll need to be earning 30xNMW. It would only be 16 hours for a single person i'm guessing?

Thanks for linking to all the tax credits information, really useful.

KatyMac

It's ridiculous isn't it.
We are ok atm but no idea how it will work out.
People don't realise how much effort goes into running a business and if you provide a service I think you'll be pretty much knackered.
I would argue the point about the part that says hours only count if they are in pursuit of customers. If you don't keep everything else in order you don't have any customers, so everything you do is in pursuit of profit from a customer.

Oh, Katy check it out but if you are a company director it may be different.

I work 50 hours; I am not a company director - I think my business is stuffed

Can I claim this year?

I think if you already receive tax credits you are ok, but not 100% sure.
I thought it was for new claimants of UC

Phew - I could do with claiming for a couple of years yet & then DH will be eligible for his pension

Did you complete a renewal this year, it didn't ask for anything different to the previous year.
I haven't done ours yet, usually leave it till end of January when they are less busy.
Do check it out though, don't take my word, for all I know they could hit me with a load of questions in January.

Yes I renewed; then I had to ring again as DD is in post 16 Education & they checked income both times & also it is on all 6 award notices along with my hours

So fingers crossed they don't change their mind

Katy do you really only make £104 net per week from your business? £5408 per year? so you pay no tax or NI? but employ 10 people?

Yep

so presumably you have significant other household income that allows you to choose to run your business at an effective loss

sorry if I sound unsympathetic but tax credits should be for households who are trying their hardest, not those who choose to use wafer thin margins.

Do you pay all of your staff £5k a year?

I used tax credits for two years while starting out (and they maxed out at under £3k a year back then)
if my business had still needed them after that long it would have been a drain on the economy, not a benefit

Talkin

You don't half sound bitter. People are trying to support themselves the best way they know how.
Some people work at things they enjoy not just to make a profit for the economy.
If they have bothered to set up a legitimate business of course they want to make money.
I'm sorry if I sound narcy but you set me off with your first post tbh.

However, thank you very much for the links you provided, they will be of use to many on the thread.

Katy, we had the post 16 thing with ds2, they asked for letters from the school, the secretary was the second time and by the time he turned 18 she was getting a bit pissed off.
I think we were unlucky and got the extra checks, but they could have checked themselves I'm sure.
Plus if we had been lying we would have been done for fraud, so why the extra checks I have no idea.
They may check your dd again next year

We haven't had a problem.....yet.....but who knows

Morethan
I'm not bitter.

I'm an accountant who understands how wutterly disastrous the expansion of tax credits has been for low earners in England and Wales.
I help out on tax credit claims for customers
but DO take a dim view of "hobby businesses" wanting the taxpayer to top them up.
Tax credits have massively distorted the business environment against true entrepeneurs (especially in photography and decorative items) meaning that housewives who do not need the money can undercut the true self employed.

Broon might have been brilliant in Scotland this week, but the backfiring of expanding Tax credits has been a disaster for the truly low earning families.

Katy on a positive note,
I assume you pay your staff the "living wage" : why not increment your fees so that you get it too?
That is how GDP grows after all.

Can't; we're already high for the area - we are aspirational - but there is a ceiling

I'd need to put fees up by 12.5% & it isn't possible

When I started my business I was warned by other s/e people around me that many businesses don't break even until their 3rd year - no idea if this is true and it wasn't for me but wouldn't that tax credits rule make it very difficult to be a start up?

I wouldn't have wanted to be topped up forever and made great efforts to expand and increase my business to that end but I would never have risked it if no help had been available during that first year.

Some sort of cut off point might be useful to weed out businesses that really aren't going anywhere as talkin says, it isn't useful to run an unsuccessful business. There needs to be a time to consider if it's just flogging a dead horse.

On a side note, tax credits are subject to change so the amount you are entitled to one year may change if the overall pot gets smaller, which is another good reason to get your business off relying on them.

As to hours, I do keep a note of everything I do including as morethan says the marketing & admin etc, and I translate that (for myself) into paid working hours so I know if I was working say 30hrs a week and not getting NMW that I would need a serious rethink.