Seasonal business owners: 21 things you need to know about sole trader tax

Some business ideas just aren’t viable throughout the year, because the weather at certain months seriously weakens demand or kills it altogether. However, running a successful seasonal business can provide some welcome additional income. Lots of…

5 Minute Read

Last Updated: 7th June 2024

Some business ideas just aren’t viable throughout the year, because the weather at certain months seriously weakens demand or kills it altogether. However, running a successful seasonal business can provide some welcome additional income.

Lots of people in the UK operate summer businesses, with many linked to tourism, summer sports or outdoor pursuits. Others trade during the autumn or winter only, many in the run-up to annual events such as Bonfire Night or Christmas. Some people run more than one seasonal business, generating enough self-employed income to sustain them throughout the year.

If you’re already running a seasonal business or you’re interested in starting one, you must ensure that you’re paying any tax due, if you are to avoid potentially expensive headaches later on. You’ll also want to ensure that you’re not paying too much tax. Here are 21 tax facts that every seasonal-business owner should know.

Is your seasonal business income taxable?   

1. If you’re running a business, you’re trading, which means your income is subject to tax once it goes over certain thresholds. Although some register their seasonal business as a limited company (which is a separate legal and tax entity and subject to different tax rules), most operate as self-employed sole traders, which means the owner and their business are one and the same thing when it comes to tax.

2. You can earn up to £1,000 of tax-free income from your seasonal business (this is called your trading allowance). So, if you earn, say, £850 gross income from your seasonal business, no tax is payable. However, tax can be payable if your gross income is, say, £1,005.

Do you need to register your seasonal business?

3. If your gross trading income is more than £1,000 a year and you’ve never registered before, you must register for Self Assessment (unless you register a limited company or start a seasonal business with someone else and register an ordinary business partnership).  

4. If you haven’t registered for Self Assessment before, you must do so before 5 October in your seasonal business’s second tax year, otherwise HMRC can fine you.

Need to know! The UK tax year runs from 6 April until the following 5 April.   

How much tax will you pay on your seasonal business income?

5. Once your trading income goes over £1,000, you’re taxed on your net profits, which is your total sales minus allowable tax expenses, with tax other tax reliefs and allowances taken into account.

6. The Income Tax band you’re in once all of your total taxable income has been added up (including any income from employment) determines how much tax you pay on your seasonal business income, after tax expenses, allowances and reliefs have been deducted.

  • You don’t pay tax on your first £12,570 of income, because this is your Personal Allowance. However, this decreases by £1 for every £2 of net income over £100,000 and if your net income is over £125,140 – you don’t get the Personal Allowance).
  • You fall into the basic rate of Income Tax if your total taxable income is between £12,571 and £50,270. You’re taxed at 20%.
  • You fall into the higher rate of Income Tax if your total taxable income is between £50,271and £125,140. You’re taxed at 40%.
  • You fall into the additional rate of Income Tax if your total taxable income is more than £125,140. You’re taxed at 45%.

(*2024/25 for all figures; Income Tax bands and rates are different in Scotland).

What about National Insurance contributions?

7. Class 4 NICs of 6% are payable on profits between £12,570 and £50,270, with 2% payable on profits over £50,270 (*2024/25 tax year for all figures).

What tax expenses can your seasonal business claim?

8. Those starting and operating a seasonal business can claim for a long list of tax expenses, which can lower your tax bill significantly. You summarise these allowable expenses within your annual Self Assessment tax return.

9. Seasonal business allowable expenses can include:

  • raw materials or stock
  • printing and packaging
  • phone use and broadband
  • travel costs (eg fuel, parking, train or bus fares)
  • premises costs (eg rent, heating, lighting, business rates, etc)
  • office stationery and postage
  • advertising and marketing costs
  • insurance and bank charges
  • accounting and solicitor fees
  • refresher training and professional membership fees
  • wages paid to others who work for you
  • safety clothes and business-branded workwear.

10. If you use something for your seasonal business and personal reasons, such as your mobile phone, you can only claim allowable expenses for business-use. You must reliably work out such costs and HMRC can ask you for proof of any allowable expense that you claim.

11. If you run your seasonal business from home, you may be able to claim for a proportion of your heating, electricity and water costs, Council Tax, mortgage interest or rent, broadband and telephone use.

12. If you use traditional accounting methods (ie you record income and expenses by the date you invoiced or were billed), you claim capital allowances when you buy equipment, machinery or a vehicle for your seasonal business. If you use cash-basis accounting (ie you only record income and costs in your accounts when you are paid or pay money out) and buy a car for your business, you can claim this as a capital allowance, but everything else must be claimed as an allowable expense.

13. To save time and effort, rather than working out your precise business expenses, you can claim flat-rate simplified expenses for vehicle use and working from home. You need to ensure that doing this doesn’t leave you at a disadvantage.

Need to know! You can’t claim any tax expenses or capital allowances if you claim the £1,000 tax-free Trading Allowance.

What tax records must your seasonal business keep?

14. You must keep accurate, up-to-date records of your sales and expenses, detailing amounts and dates. This will enable you to complete your Self Assessment tax return (more later) and show proof of your income and costs should HMRC (the UK tax authority) request it. You should retain copies of all invoices you send out, as well as receipts and invoices for things you claim as tax expenses. Also keep a detailed mileage log if you plan to claim for fuel costs.

15. HMRC can charge you a penalty if your records are not accurate, complete and legible. You must keep your records for at least five years after the 31 January online tax return deadline for each tax year.

Does your seasonal business need to register for VAT?

16. You must register for VAT if your total VAT-taxable turnover (ie sales or income that is subject to VAT) for the past 12 months was more than £90,000 (the VAT threshold for 2024/25) or you expect your VAT-taxable turnover to go over £90,000 in the next 30 days.

17. You can choose to register voluntarily for VAT if your turnover is less than £90,000, which can be wise if you’re paying a lot of VAT on the things you buy for your business, however, it means having to submit digital tax returns each quarter.

How do you report your seasonal business income?

18. Each year, you report your taxable income, expenses and allowances by completing a Self Assessment tax return (the SA100) and the SA103 supplementary tax return page, summarising your seasonal business income, expenses and allowances.

Need to know! If you have more than one seasonal sole trader business, you must complete an SA103 for each, summarising specific income and expenditure for each of your seasonal businesses.

19. You can file your tax return any time after the tax year finishes on 5 April, although the annual deadline for filing your Self Assessment tax return online, which is what most people do, is midnight on 31 January. If you miss the filing deadline, a £100 fine is payable immediately. Once HMRC receives your tax return, they’ll work out your tax bill and let you know how much you owe.

20. You could be fined heavily if HMRC finds out that you haven’t been reporting taxable income from a seasonal business. Late tax payments can also result in fines and interest.

What about business rates?

21. Business rates are payable on non-domestic properties such as shops, offices, warehouses, factories and holiday rental homes. Your local council will send you a business rates bill in the spring for the following tax year. Business rates relief from your local council might be available. 

Many people who run seasonal businesses in the UK use GoSimpleTax when completing their Self Assessment tax return and SA103. It makes the process far easier, saves you lots of time and can help you to pay less tax by claiming all of your tax expenses, allowances and reliefs.   

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Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.

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