Cake shed bakers warned as side hustle tax rules bite

With the cost of living and changes to tax thresholds taking a bite out of pay packets, more people are turning to a side hustle to make extra cash.

With the prevalence of social media, a new money-making trend seems to appear every week, the newest of these being ‘cake sheds’, colourful unmanned roadside cabinets containing cakes, brownies or biscuits, which customers are expected to pay for via an honesty policy.

While cake sheds are a relatively new term, the concept is not. The UK has a long tradition of farm gate and honesty box selling, where households and farmers leave eggs, vegetables, plants, flowers, jams, firewood and other goods for customers to buy and pay for on trust.

The cake shed trend seemingly accelerated after the pandemic, with websites appearing marking the locations of hundreds of sheds. The practice has apparently become lucrative, with some shed-based bakers making up to £600 a week.

However, cake shed owners could be facing huge tax bills from HMRC if they haven’t registered for self-assessment,taxpayers who need to complete a self-assessment tax return for the 2025-26 tax year must notify HMRC by 5 October 2026.

With some people not realising that the cash from baking and selling cakes is classed as trading income and should be disclosed to HMRC each year on a self-assessment tax return, not registering for self-assessment when required to do so is a bad idea.

In fact, HMRC can compare information from councils with their self-assessment records to determine if sellers have paid the correct amount of tax on the income received. 

Failing to register for self-assessment can result in penalties of between 20% and 70% of the tax due where HMRC judge the behaviour to have been “deliberate but not concealed” 

If you need advice on Self-Assessment please contact us, one of our team will be happy to help.

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