Tax Guide for Cake Makers

Running a cake business in the UK — whether you're creating bespoke wedding cakes, birthday showpieces, celebration cakes, or sugarcraft masterpieces — is a craft business like any other, and HMRC treats it accordingly. Your earnings are taxable, your expenses are deductible, and your record keeping needs to be as meticulous as your piping.

Cake making has some unique tax considerations: the zero-rated VAT status of most cake products, the ability to claim kitchen and home-based costs, and the mix of product sales and service income that many cake businesses generate. This guide covers all of it, clearly and practically, for the 2025–26 tax year.

Registering as Self-Employed and as a Food Business

As a cake maker, you have two registrations to consider: HMRC registration for tax purposes, and local authority registration as a food business.

HMRC Registration

If your cake-making income exceeds £1,000 per year (the Trading Allowance), you must register with HMRC for Self-Assessment.

Register by: 5 October following the end of the first tax year you earned more than £1,000 from cake sales.

How to register: At gov.uk/register-for-self-assessment. You'll receive a Unique Taxpayer Reference (UTR) within 10 working days.

Food Business Registration

Separately, you must register your cake business with your local authority's environmental health team at least 28 days before you start trading. This is a legal requirement under food business regulations — and it's free. Whether you bake from a home kitchen or a commercial premises, you need this registration.

Both registrations are legal requirements. HMRC registration covers your tax affairs; food business registration covers food safety compliance. Don't confuse the two.

The Trading Allowance

The Trading Allowance means you can earn up to £1,000 from self-employment in a tax year without paying tax on it or needing to register. Many home bakers who start selling occasionally will fall under this threshold initially.

Once your cake income exceeds £1,000, you must register and file a Self-Assessment return. You can either claim the £1,000 Trading Allowance as a flat deduction (simpler) or deduct your actual business expenses (usually better if your ingredient and equipment costs exceed £1,000).

Allowable Expenses for Cake Makers

The golden rule: expenses must be "wholly and exclusively" for business purposes. For cake makers, this covers a substantial range of costs.

Ingredients and Consumables

Every ingredient used in cakes you sell is deductible:

• Flour, sugar, butter, eggs, milk, cream
• Food colourings, flavourings, extracts
• Fondant, sugarpaste, modelling chocolate, gum paste
• Edible decorations, lustre dusts, edible glitters
• Cake boards and drums
• Packaging — cake boxes, ribbon, tissue paper, bags

Important: Only ingredients used for business cakes are deductible. If you also bake for family and personal consumption, keep these separate and only claim the commercial proportion.

Cake Tools and Equipment

The tools of your trade are all deductible:

• Stand mixers and hand mixers
• Cake tins, moulds, silicone tools
• Piping bags, nozzles, turntables, scrapers, spatulas
• Sugarcraft tools — cutters, moulds, modelling tools, impression mats
• Airbrush kits and compressors
• Flower wires, picks, stamen, and assembly materials
• Food photography props (for product photos)

For larger one-off purchases (e.g., a professional stand mixer costing several hundred pounds), you can claim the full cost in the year of purchase under the Annual Investment Allowance — you don't have to depreciate it over multiple years.

Kitchen and Utility Costs

This is where home cake makers have a significant advantage. If you use your home kitchen for business, you can claim a proportion of household costs:

• Gas and electricity: Calculate the proportion of time the kitchen is used for business versus personal use
• Water bills: A smaller proportion, but still claimable
• Broadband: A proportion for business use (ordering supplies, managing bookings, marketing)

HMRC's simplified flat rate is available for home office use (£10–£26/month) — but this is designed for desk-based work, not kitchen production. For home kitchen businesses, a calculated proportional approach is usually more appropriate and yields a higher deduction. An accountant can help you structure this correctly.

Note: If you claim a proportion of your home as exclusively for business, this could affect your Capital Gains Tax Private Residence Relief when you sell your home. Claiming shared-use proportions (not exclusive use) avoids this risk.

Delivery and Postage

If you deliver cakes to clients:

• Own vehicle: 45p per mile for the first 10,000 business miles; 25p per mile thereafter
• Packaging for postage (if you ship cake products)
• Specialist delivery boxes or insulated packaging

Keep a mileage log: date, destination, purpose, miles.

Website and Marketing

• Website design, build and hosting
• Domain name
• Paid social media advertising (Instagram, Facebook, Pinterest are key for cake makers)
• Professional photography of your cakes (fully deductible — this is not personal photography)
• Business cards, flyers, wedding fair leaflets
• Wedding fair exhibitor fees — often significant, and entirely deductible
• Listing fees on booking platforms and event directories

Professional Training and Development

• Cake decorating courses and sugarcraft workshops
• Masterclasses with specialist cake designers
• Business courses relevant to running your cake business
• Online tutorials and course subscriptions (Craftsy, YouTube premium courses)
• Books and specialist publications

Food Hygiene and Compliance Costs

• Food hygiene certification (Level 2 Food Safety, and Level 3 if you pursue it)
• Food allergy awareness training
• Any regulatory compliance training
• Allergen labelling materials and systems

Insurance

• Public liability insurance (essential if delivering to or hosting clients)
• Product liability insurance (important for food businesses — covers claims if a product causes harm)
• Business equipment insurance

All insurance premiums are fully deductible.

VAT and Cakes: An Important Distinction

Most food, including cakes, is zero-rated for VAT — not exempt. The distinction matters:

• Zero-rated: The supply is subject to VAT at 0%. If VAT-registered, you can still reclaim VAT on your business purchases.
• Exempt: The supply falls outside the VAT system. You cannot reclaim VAT on purchases related to exempt supplies.

In practice, most cake sales are zero-rated. However, some products straddle the line — for example, luxury confectionery, certain biscuit types, and sugary snacks can attract standard-rate VAT. The rules are notoriously complicated (the famous Jaffa Cake case turned on whether it was a cake or a biscuit). For custom celebration cakes and wedding cakes, zero-rating almost always applies.

VAT registration threshold: You must register if your taxable turnover exceeds £90,000 in any rolling 12-month period. For cake makers, this is typically reached only by established businesses producing significant volumes.

Benefit of VAT registration for cake makers: Because your sales are zero-rated (no output VAT charged) but your inputs attract standard 20% VAT (ingredients from VAT-registered suppliers, equipment, packaging), being VAT-registered means you reclaim VAT on purchases while not charging VAT on sales. This can be financially advantageous for cake makers with high input costs. An accountant can help you decide whether voluntary registration below the threshold makes sense for your business.

Record Keeping

Keep records for at least five years after the relevant Self-Assessment deadline.

For cake makers, essential records include:

• Sales records: each order, client name, amount paid, date
• Ingredient purchase receipts (supermarket receipts, wholesale invoices)
• Equipment purchase receipts
• Delivery mileage log
• Bank statements for a dedicated business account
• Invoices issued to clients

Given the high volume of small transactions (ingredient purchases, packaging orders), a simple spreadsheet or accounting app updated weekly works well. Photograph all receipts with your phone and store them digitally.

Self-Assessment: Filing Your Return

Key dates:

• 5 April — end of the tax year
• 31 January — online return and tax payment deadline
• 31 October — paper return deadline

Income Tax rates 2025–26:

• £0–£12,570 — Personal Allowance (0%)
• £12,571–£50,270 — Basic Rate (20%)
• £50,271–£125,140 — Higher Rate (40%)
• Over £125,140 — Additional Rate (45%)

Your taxable profit is your total cake income minus all allowable expenses. Income Tax is due on profits above the Personal Allowance.

Payments on Account: If your tax bill exceeds £1,000, HMRC requires advance payments toward next year's bill — 50% on 31 January and 50% on 31 July. Set money aside monthly to handle these without stress.

National Insurance

Class 2 NI: £3.50/week — voluntary if profits are below £6,845. Paying voluntarily protects your State Pension entitlement.

Class 4 NI (2025–26):

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270

Both calculated via Self-Assessment.

Making Tax Digital (MTD)

From April 2026, sole traders with income above £50,000 must submit quarterly digital updates to HMRC using MTD-compatible software, plus a year-end finalisation. The threshold drops to £30,000 in April 2027.

Even if your income is below these thresholds now, adopting cloud accounting software immediately builds good habits and prepares you for future compliance requirements. FreeAgent, Xero, and QuickBooks all support MTD.

Practical Tips for Cake Makers

1. Open a separate business bank account. All cake income in, all cake expenses out. Simple, clean records that will save you hours every January.

2. Log every ingredient purchase. Supermarket runs for business baking are deductible. Keep the receipt or photograph it. Over a year, this adds up to significant tax savings.

3. Photograph your cakes professionally. Good product photography is a marketing expense you can claim — and it's essential for attracting premium clients.

4. Claim wedding fair costs. If you exhibit at wedding fairs, the stand fee, display materials, printed materials, and samples are all business expenses.

5. Get an accountant for your first year. The zero-rating nuance, home kitchen apportionment, and equipment capital allowances are areas where a good accountant pays for themselves in year one.

6. Save 20–25% of income for tax. Cake income is often lumpy — big deposits followed by balance payments. Save from every incoming payment, not just the final balance.

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