What this guide covers
Profit is what's left after costs — not your sales total. Underpricing is the classic mistake. A Saturday job is "employed"; selling things you make is usually "self-employed". The UK gives a £1,000 trading allowance a year: under that you generally don't tell HMRC; over it you might need to. Always check current rules at GOV.UK.
Cost, price, profit
Say you make custom keyrings and sell 20 at £4 each. That's £80 of revenue — but it isn't profit yet. Take off your costs first.
Profit = revenue − costs. A variable cost happens per item (materials). A fixed cost happens whatever you sell (a one-off tool or stall fee).
Don't undersell yourself
The most common teen-business mistake is pricing too low to "get sales". If your cost per keyring is £1.70 and you charge £2, almost nothing is left for your time or fixed costs. Price must comfortably clear your cost per item — your time has value too.
Employed vs self-employed
These are taxed differently:
- Employed (e.g. a Saturday job): your employer handles tax through PAYE before you're paid. You usually don't have to do anything.
- Self-employed / trading (e.g. selling crafts or art online, tutoring, car washing): it's your responsibility to keep records and, if you earn enough, tell HMRC.
The £1,000 trading allowance
The UK gives a trading allowance of £1,000 per tax year. In plain terms:
| Your trading income in the tax year | What it usually means |
|---|---|
| £1,000 or less | Generally no need to tell HMRC or pay tax on it |
| More than £1,000 | You may need to register for Self Assessment and report it; you can deduct the £1,000 allowance or your real expenses |
Most teenagers also have a Personal Allowance, so small amounts usually mean no tax — but the £1,000 reporting line is the bit to remember. Figures can change at a Budget, so always confirm at GOV.UK.
Keep it sensible and safe
- Keep simple records — money in, money out — from day one.
- Talk to a parent or carer before signing up to any selling platform or payment app.
- It's a business, not a "scheme". "Make money fast", paying to join, recruiting friends, or being asked to move money for someone are red flags — that's scams or money-mule recruitment, not enterprise.
How this links to school
This guide supports PSHE (enterprise and managing money), Citizenship (income and the role of money), and Maths (profit and percentages). Teachers can use the matching lesson plan: KS4 — starting a small business and teen earnings.
For teachers — use this page as a 10-minute lesson
Learning focus. By the end, pupils can: How to work out profit from cost and price, why underpricing is a trap, the difference between employed and self-employed, and the £1,000 UK trading allowance and when a side hustle must be reported to HMRC.
Plenary (2 min). Each pupil writes one sentence: the most useful thing on this page and one real situation they would use it in. Share three.
Quick check. Mini-whiteboards: pupils state the page’s key rule in their own words. Scan for anyone holding the opposite idea and address it.
Take it further: printable worksheet · age lesson pack · full lesson plans
Where this fits — UK curriculum
Aligned to all four UK nations for Ages 14–16. Full citable mapping & CC BY 4.0 reference: UK curriculum map.
- England
- National Curriculum (England) — Key Stage 4. Mathematics; Citizenship (money, budgeting, managing risk).
- Scotland
- Curriculum for Excellence (Scotland) — Third / Fourth Level & Senior Phase. Numeracy & Mathematics — Number, money and measure. (MNU 3-09b, MNU 4-09a)
- Wales
- Curriculum for Wales — Progression Step 4. Mathematics and Numeracy; Health and Well-being.
- Northern Ireland
- Northern Ireland Curriculum — Key Stage 4. Mathematics and Numeracy; Learning for Life and Work.