Which one are you and do you know the difference?
Read on to find out what they both mean and how you can go from a hobby baker to a business in the U.K.
Let's start with the definitions:
Hobby Baker: A person that bakes in their spare time and/or for 'fun'.
Home Baker: A person that bakes at home - to sell or as a hobby
Baking Business: A registered business that sells baked goods for profit.
I was a hobby baker for about 5 years before I became a registered business.
What did a 'hobby baker' mean for me?
I baked and decorated cakes for fun and for my own pleasure. It was an obsession that got started once I discovered I could bake a good sponge cake! I collected the cake decorating magazines, you know, the ones with the free tools and equipment? I built up such a collection that my kitchen was taken over by them. I asked my family to buy me a decent mixer and cake tins for Christmas and I was always on Youtube looking for the next free tutorial. I also started a facebook page to show off my cakes. I wasn't advertising though, and I didn't sell anything, I just made cakes for family and friends and practiced new techniques and designs.
A hobby baker might donate their bakes to charity, or give baked gifts to others. They might be self taught and learning different baking skills. They may have a full or part time job at the same time.
I was a full time teacher when I first started my hobby. By the time I registered as a business, I was a part time teacher and had a 6 month old child. It's quite common for someone who runs a baking business to have a second source of income/other employment.
If you are a hobby baker, you are not supposed to sell your goods and charge for your services. It is debated that you can charge for the cost of ingredients (which is a small amount) however, if you take in an amount that totals over £1000 in a tax year, you have to declare your income to HMRC (His Majesty's Revenue & Customs). Hobby bakers are also not supposed to charge for their time or earn a wage.
Here's why...
"If you are providing food on a regular and organised basis, you are a food business under food law" (ref: FSA - Food Standards Agency). This is regardless of whether you are being paid for your goods or not. For example, this could include providing baked goods for a charity, schools (i.e. PTAs), or community meetings.
If you are regularly providing food products to others, then you will need to register as a food business with your local authority (council).
"Registration will apply to all types of businesses who sell food and or drink, regardless of where you operate from" REF: FSA
This means that regardless of how much, if you are selling food or drink, you have to register as a food business.
If you are calling yourself an "Hobby Baker", you are not charging anything for your services and you are not supplying regular food products to others.
If you want to start charging for your baked goods, then you will also need to register with HMRC as a sole trader for your self assessment. If you do not earn over £1000 in a tax year, you do not need to submit a tax return, but you must be registered before the 1st October just in case your income changes!
Something to bare in mind:
If you are also employed elsewhere (e.g. you have another job) and currently taxed on your income, all of your income from self employment will be taxed.
As an example: I was a part time teacher and taking home approx. £1500 each month after deductions. If I made a profit of £500 that same month through my cake business, I was taxed on the whole £500. Overall, I was taxed on every bit of profit I made within my cake business because I was over the threshold of personal allowance within my employment (currently £12,570 in 2024) .
HMRC will see you as a trader if you:
sell regularly to make a profit
make items to sell for profit
sell items on a regular basis, either online, at car boot sales or through classified adverts
earn commission from selling goods for other people
are paid for a service you provide
ref:HMRC
You must tell HMRC if you have:
gross trading income over £1,000
ref: HMRC
Baking occasionally for charity and donating your baked goods is not only a kind gesture, you are also not making any money from doing it. This means you do not need to register with your local authority - unless of course, you end up doing this regularly!
Summary
If you are receiving money for your baked goods, you have to be registered with your local authority as a food business.
If you are a registered food business, you have to be registered with HMRC even if you are below the £1000 threshold of income.
If you are providing free baked goods for anyone, on a regular basis, you must be registered with your local authority as a food business.
If you are providing free baked goods that is not on a regular basis, you do not need to be registered with your local authority or HMRC.
Check out my FREE download - 10 steps to take when starting a baking business from home. This document outlines all the things you need to consider when starting a baking business, no matter how big or small your business may be.
If you have any questions on this, please email me!
If you want to provide baked goods for charities, take a look at this link from the FSA who offer some great advice on whether you need to register and how to keep your baked goods in line with food safety.
Make sure you follow me on Instagram or Facebook for more information on starting a baking business.
Speak soon!
Krissy
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