Candle Makers — Home Business Tax Guide

The handmade candle market has boomed in recent years. What starts as a satisfying hobby — melting wax, blending fragrances, pouring moulds — can quickly turn into a thriving small business, with orders coming in through Etsy, Instagram, craft fairs, and local stockists. But once the money starts flowing, so do the tax obligations.

If you are making and selling candles in the UK, this guide covers everything you need to know about tax, expenses, and keeping your records in order.

When Does Candle Making Become a Business?

The line between hobby and business is the same for candle makers as it is for any other craft. HMRC looks at the overall picture:

• Are you selling regularly (not just the odd candle to a friend)?
• Do you have a website, Etsy shop, or social media presence promoting your candles?
• Are you trying to make a profit?
• Have you invested in equipment, materials, and branding?

If you are answering yes to most of these, your candle making is a trade in HMRC's eyes, and the income is taxable.

The good news is the trading allowance gives you £1,000 of tax-free trading income per year. If your total sales from candle making (and any other casual trading) stay below £1,000, you do not need to register as self-employed. But once you cross that threshold, you need to act. For more detail, see our guide on how much you can earn before telling HMRC.

Registering as Self-Employed

Once your candle sales exceed £1,000 per year, you need to register as self-employed with HMRC. Most candle makers start as sole traders — it is simple, low-cost, and perfectly adequate for a small home business.

Registration gives you a Unique Taxpayer Reference (UTR) number, and from then on you will need to file an annual Self Assessment tax return. You pay income tax on your profit (sales minus allowable expenses), not on your total turnover.

The personal allowance is £12,570 — you pay no income tax on profits up to this amount (assuming you have no other income using up the allowance). Above that, the basic rate is 20%. You will also pay National Insurance on your self-employed profits — see our National Insurance guide for current rates.

Allowable Expenses for Candle Makers

Here is where running a candle business gets more tax-friendly. Every legitimate business expense reduces your taxable profit. For candle makers, common expenses include:

Materials and Supplies

• Wax — Soy wax, beeswax, paraffin, coconut wax, and blended waxes.
• Fragrance oils and essential oils — Your scent library is a business expense.
• Wicks — Pre-tabbed wicks, wick bars, and wick holders.
• Dyes and colourants — Candle dyes, micas, and pigments.
• Containers — Jars, tins, pots, and vessels.
• Packaging — Boxes, tissue paper, bubble wrap, shipping materials, and branded stickers.
• Labels and branding — Printed labels, hang tags, and brand collateral.

Equipment

• Wax melters and pouring pots — Double boilers, wax melting pots, and thermometers.
• Moulds and tooling — Silicone moulds, pillar moulds, and finishing tools.
• Scales — Precision scales for measuring wax and fragrance.
• Heat guns — For finishing and smoothing candle tops.
• Storage — Shelving, containers, and workspace organisation.

Selling Costs

• Etsy fees — Listing fees, transaction fees, and payment processing fees. These are deductible even though Etsy deducts them before paying you — your gross sales figure is your income, and the fees are a separate expense.
• Website costs — Domain registration, hosting, Shopify or Squarespace subscription, and payment processing.
• Craft fair fees — Stall hire, table fees, and any associated travel costs.
• Photography — Product photography equipment or professional photography services.
• Postage and shipping — Royal Mail, courier services, and packaging materials.
• Marketing — Social media advertising, Google Ads, printed flyers, and business cards.

Home Business Costs

• Use of home — If you make candles at home (and most candle makers do), you can claim a proportion of your household costs: rent/mortgage interest, electricity, gas, water, council tax, and broadband. The proportion should reflect the space and time used for the business.
• Alternatively, you can use HMRC's simplified expenses flat rate for working from home (£10/month for 25-50 hours, £18/month for 51-100 hours, or £26/month for 101+ hours), though for candle makers with dedicated workspace and high utility usage (all that wax melting takes electricity), calculating the actual proportion often gives a better result.

Other

• Insurance — Public liability and product liability insurance (essential if you are selling products that involve an open flame).
• Training — Candle making courses, business courses, and relevant workshops.
• Testing and compliance — CLP (Classification, Labelling and Packaging) assessments, safety data sheets, and testing services (more on this below).
• Accounting software — The cost of tools like Accounted to manage your bookkeeping.

For the full list of what sole traders can claim, see our complete expenses guide.

CLP Compliance and Safety Regulations

This is not strictly a tax matter, but it is an important cost of doing business. If you sell candles in the UK, you must comply with the CLP Regulation (Classification, Labelling and Packaging of substances and mixtures). This means:

• Each candle containing fragrance oil needs a CLP-compliant label listing any hazardous ingredients.
• You need a Safety Data Sheet (SDS) from your fragrance oil supplier.
• If you sell cosmetic products (wax melts used as room scents may qualify), additional regulations apply.

The cost of obtaining CLP assessments and producing compliant labels is a deductible business expense.

Selling on Etsy and Other Platforms

Etsy is the go-to marketplace for many candle makers. A few tax points to keep in mind:

• Record gross income — The amount before Etsy takes its cut. Etsy's fees (listing, transaction, offsite ads, payment processing) are separate deductible expenses.
• International sales — If you sell to customers outside the UK, VAT treatment may differ. Etsy now collects and remits VAT on behalf of sellers for sales to EU consumers, but you still need to record the transactions.
• Multiple platforms — If you sell on Etsy, Amazon Handmade, Not On The High Street, and your own website, all income from all channels is combined for tax purposes.

For more on selling crafts online, our guide for jewellery makers on Etsy covers similar territory and is well worth reading.

VAT — Will It Affect You?

The VAT registration threshold is £90,000. Most home-based candle businesses will be well below this. If your business grows to the point where your turnover approaches £90,000 in a 12-month period, you will need to register for VAT and charge 20% on your sales.

Candles are standard-rated for VAT (they are not zero-rated like food). So if you do register, all your candle sales will attract VAT. Our VAT registration threshold guide explains the process and considerations.

Record Keeping

HMRC requires you to keep business records for at least five years. For candle makers, this means:

• Sales records — Every sale, whether through Etsy, a craft fair, or a direct order. Include the date, amount, and buyer (where relevant).
• Expense receipts — Keep receipts for all purchases of materials, equipment, and services.
• Bank statements — Make sure business transactions are identifiable.
• Stock records — Useful for tracking the cost of materials and understanding your margins, even if not strictly required by HMRC for most sole traders.

Rather than drowning in paper receipts, you can use Accounted to photograph and store them digitally. Penny will help categorise your spending automatically, so you always know exactly where you stand — and you will not be scrambling through shoeboxes in January.

Pricing Your Candles — A Tax-Aware Approach

When setting your prices, make sure you factor in:

1. Cost of materials per candle (wax, fragrance, wick, container, label, packaging).
2. Overheads (a share of your workspace costs, insurance, equipment depreciation).
3. Platform fees (Etsy takes around 10-15% all in).
4. Your time (what hourly rate do you want to earn?).
5. Tax — Remember, you will owe income tax and National Insurance on your profit. If you do not factor this in, you may find your margins are thinner than you thought.

A common mistake is pricing candles based only on material costs, forgetting that 20-30% of your profit will go to tax if you are above the personal allowance.

Growing Your Candle Business

As your business grows, keep an eye on:

• VAT threshold — Monitor your rolling 12-month turnover.
• Making Tax Digital — From April 2026, sole traders with income above £50,000 must keep digital records and submit quarterly updates to HMRC.
• Product liability — As sales increase, so does your exposure. Make sure your insurance keeps pace.
• Employing staff — If you take on help, you will have employer obligations including PAYE, National Insurance, and auto-enrolment pensions.

Wrapping Up

Candle making is a genuinely rewarding business, and the tax side is far less intimidating than it might seem. Register when you need to, keep records as you go, claim every expense you are entitled to, and set money aside for your tax bill.

Accounted helps UK sole traders stay on top of their bookkeeping and tax. Start your free 30-day trial at getaccounted.co.uk.

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Related reading:

• Tax Guide for Jewellery Makers on Etsy
• Sole Trader Expenses — The Complete List
• How Much Can You Earn Before Telling HMRC?

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