Selling crafts: taxes and rules in the US and UK (2026)

"How do I sell crafts without paying taxes?" is one of the most searched questions by people who start selling what they make. The honest answer: in most cases the income is taxable, but the rules for small sellers are simpler than the rumors suggest. We went to the official sources (IRS, GOV.UK and HMRC) so you can see what applies.

Important: this article is for information only and was checked on October 30, 2026. It is not tax or legal advice. Rules depend on your country, state and how you sell. When in doubt, ask an accountant or the tax authority.

United States

Hobby or business?

The IRS draws the line by intent: businesses operate to make a profit, hobbies are for pleasure or recreation (IRS). Either way, the money you make is income:

• Hobby income is reported on Schedule 1 (Form 1040), and hobby expenses are generally not deductible.
• Business income goes on Schedule C, where you can deduct business expenses such as materials, fair fees and shipping.
• If your net earnings from self-employment are $400 or more, you also owe self-employment tax and file Schedule SE.

Signs that the IRS looks at include whether you run the activity like a business, keep records, depend on the income and try to improve profitability.

The 1099-K threshold went back to $20,000

Payment apps and marketplaces send Form 1099-K when a seller receives more than $20,000 across more than 200 transactions in a year. The One Big Beautiful Bill restored that threshold, replacing the lower $600 figure you may still see online (IRS). Some states have lower thresholds.

The key point: the form does not change what is taxable. All income is taxable unless the law says otherwise, even if you never receive a 1099-K.

Sales tax is a state matter

Most states require a seller's permit to collect sales tax on taxable goods, and rules for craft fairs and online sales vary. Check your state's department of revenue before your first fair.

United Kingdom

The £1,000 trading allowance

In the UK you have a £1,000 tax-free trading allowance per tax year (6 April to 5 April). If your total gross income from side hustles stays under £1,000, you generally do not need to tell HMRC. Above it, you do, usually through a Self Assessment tax return (GOV.UK).

Three details people often miss:

• It is gross income, not profit: the test uses what you take in before expenses.
• It is one allowance for all your side hustles combined: £600 from crafts plus £500 from something else is £1,100.
• If you make goods with the intention of selling them for a profit, you are likely trading. Selling your own unwanted belongings is different (Tax Help for Hustles, HMRC).

Platforms report your sales

Since 1 January 2024, digital platforms collect and report seller information to HMRC. HMRC also says the viral "30 items" rule is a myth: the tax rules did not change, the reporting did (GOV.UK).

Product rules apply no matter how small you are

• Cosmetics (soap, balms, creams) have their own rules in both countries, separate from tax. In the UK and the EU, a safety assessment and notification are required before selling.
• Food usually needs registration with your local authority or a cottage food permit, depending on the state.
• Children's products and toys have specific safety requirements.
• Selling into the EU: the EU General Product Safety Regulation applies to online sales to EU consumers.

Checklist before you sell regularly

• Decide whether you are selling occasionally or running a business, and keep records either way.
• US: report hobby or business income, check self-employment tax and your state's sales tax rules.
• UK: add up all side-hustle income against the £1,000 allowance and register for Self Assessment if you go over it.
• Check whether your product has its own rules (cosmetics, food, toys).
• Price with taxes and fees included: how to price your products with confidence.

Where Mercader fits

Mercader is a storefront: it shows your products, your fairs and a way to contact you. It does not process payments or take a commission on sales, and it does not change your legal obligations: you close the sale yourself, through the channels you already use. If you are set up and want a tidy place to show what you make, you can create your storefront with a 14-day trial. Still choosing channels? Start with where to sell handmade items online.

Official sources

• Hobby or business: what to know about that side hustle (IRS)
• Form 1099-K threshold reverts to $20,000 (IRS)
• Tax-free allowances on property and trading income (GOV.UK)
• Check if you need to tell HMRC about income from online platforms (GOV.UK)
• Buying or making things to sell: tax rules (HMRC Tax Help for Hustles)