Got a couple of really basic tax questions.
I'm looking to register as sole trader to sell some woodworking projects and to have a small side income trading under a trading name. I also have a full time job on which i already pay PAYE.
I understand that i'm going to have to declare any extra income and file an IR3 at the end of the tax year to pay tax on that income, but i've got two main questions;
a) Am i required to declare all expenses related to that side income ? It's quite likely to be as much or more than the actual income if i claim everything (like a % of my house power due to working from home, raw materials, and etc). I understand that'll make it a loss for tax purposes and i'll pay zero tax on the income, but do i have to claim everything anyway, or can i just claim enough expenses to cover the amount i'd have been taxed ? I'm ok with this business coming out as break-even.
b) Would this affect my PAYE tax that i've already paid at all ? I've read in some places that you should declare all expenses from a side income (i think it was due to otherwise possibly representing the business as more profitable than it was if you came to sell the business), but if i do that and it turns out i've had more expenses than income, does that affect my PAYE tax ? I'm hoping the answer is no, otherwise surely they'll be angry that a side income is taking their tax away again, and classify it as a hobby.
Regarding the hobby bit, the issue is that while to me it's something i enjoy doing and i'll probably not even break even, i'd definitely like to make a profit if i can and the 'intention to make a profit' is generally what they classify as being a business.... But realistically i'll probably make a loss after expenses :) However after registering a domain name, putting out a bit of advertising etc wouldn't it be hard to classify as a hobby any more ?
Or am i overthinking this entirely ? At what point does lost tax become an issue ? $100/pa ? $1000/pa?