Rewiring your brother-in-law’s kitchen on a Saturday doesn’t feel like “the business.” No invoice, no advert, just a mate helping out. Your insurer and HMRC don’t always see it that way, though.
The difference matters more than it looks like it should. Below, we set out what actually decides it, not what feels fair.
Does it matter if you didn’t get paid?
Less than most people assume. Both insurers and HMRC look past whether money changed hands and ask what the activity actually was. The detail that actually matters is your trade skill – the specific thing you’re qualified and insured to do for a living. Not whether it was a paid job or a favour.
An electrician rewiring a friend’s kitchen for nothing is still doing electrical work. A joiner knocking up a quick shelf for a neighbour is still doing joinery, even with their own tools on a Saturday.
That doesn’t mean every unpaid favour counts as business – it means “I didn’t charge for it” isn’t the test either side actually applies.
What actually decides it for your insurance?
Public liability policies exist to cover businesses against compensation claims from the public or clients [1]. Those claims have to arise from the business’s activities. Tradesman Saver’s own cover is built around that same principle. The exact wording of what counts as a business activity isn’t always spelled out plainly on a policy summary page – that’s exactly why this catches people out.
In practice, insurers tend to look at whether the work relates to your trade, not whether you invoiced for it. A trade skill applied outside a formal job can fall inside your policy’s definition of business activity, or it can fall outside it entirely. It depends on the specific wording, and that’s a grey area worth resolving before something goes wrong, not after.
What does HMRC actually count as trading?
HMRC doesn’t use a single, tidy rule either. It weighs up a set of factors sometimes called the “badges of trade” [2]. For example:
- How often you do this kind of work
- Whether you’re doing it with a view to profit
- How similar it is to your normal trade
No single factor settles it on its own. HMRC’s own guidance says “the presence or absence of a particular badge is unlikely, by itself, to provide a conclusive answer” [2]. It’s the overall impression across all of them that actually decides it.
There is one practical safety net worth knowing. The trading allowance lets you earn up to £1,000 a year from casual work, tax-free, no need to tell HMRC or file anything extra [3]. Gardening and babysitting are HMRC’s own examples of what qualifies.
A single one-off favour for a relative is likely to sit inside that allowance. However, a pattern of similar jobs for cash, even for people you know, starts to look like trading well before it hits any specific number.
So where’s the actual line, in practice?
Three questions get you most of the way there:
- Did the job use your specific trade skill, not just general handiness?
- Is it the kind of thing you’d plausibly do again for someone else?
- Did anything of value change hands, cash, a discount, a favour swapped back?
Answer yes to more than one of those, and it’s worth treating the job as business. For both insurance and tax purposes, whatever it felt like on the day. That’s true even at a reduced rate. If you’re the kind of tradesperson who offers mates’ rates to friends and family, a discounted job is still a job, not a favour.
None of this is about assuming the worst of a Saturday spent helping someone out. It’s about knowing which side of the line you’re standing on. So a call to your insurer, or a quick check of the trading allowance, happens before you need it, not after.
Sort the cover before the favour, not after
Tradesman Saver has arranged cover for tradespeople since 1984 – direct rather than through comparison sites. Public liability, products liability, financial loss, legal expenses, and accidental death insurance cover come bundled in as standard. It’s all backed by Standard & Poor’s A-rated insurers.
If you’re not sure whether your current policy actually stretches to cover the odd favour job alongside your regular work, it’s worth checking rather than assuming. Get a quote from Tradesman Saver now.
Sources
- ABI (Association of British Insurers), “Liability insurance”
- GOV.UK, HMRC internal manual, “Meaning of trade: badges of trade: summary” (BIM20205)
- GOV.UK, “Tax-free allowances on property and trading income”
Disclaimer: This information is provided for general guidance only and does not constitute tax advice. You should seek advice from a qualified tax professional regarding your specific circumstances before making any decisions.
