A quiet revolution in British baking is under threat. Home bakers operating makeshift cake sheds from their gardens are generating up to £1,000 a week, a testament to the resilience of grassroots entrepreneurship. But proposed tax changes could dismantle this cottage industry, raising questions about the future of small-scale food production.
The phenomenon, dubbed the 'cake shed economy', has flourished since the pandemic. Bakers, often women working from home, convert garden sheds into micro-bakeries, selling cakes, brownies, and pastries to local customers via social media and word of mouth. The model is lean: minimal overheads, flexible hours, and a direct connection to the community. For many, it supplements household income; for some, it has become a primary livelihood.
But HM Revenue and Customs is circling. Under new rules stemming from the government's crackdown on the 'hidden economy', home bakers may face stricter reporting requirements and potential taxation on earnings previously declared as hobby income. The £1,000 trading allowance, which currently exempts small-scale sellers from tax, is under review. Industry experts warn that if the allowance is reduced or withdrawn, many shed bakers will be forced to close or operate illegally.
'The appeal of the cake shed is its simplicity,' said Eleanor Wright, a food industry analyst at the Institute of Economic Affairs. 'It allows people to monetise a skill without the burden of commercial premises, insurance, and VAT. Taxing them out of existence would be a blow to the very spirit of enterprise the government claims to champion.'
Local councils have also raised concerns about hygiene standards and planning permission. While most shed bakers operate informally, some have faced complaints from neighbours about increased foot traffic and parking. The Food Standards Agency has issued guidance, but enforcement remains patchy.
For bakers like Sarah Mitchell from Kent, who earns £800 weekly from her garden railway-themed cake shed, the tax changes are existential. 'I started this to supplement my pension after my husband died. It is now my main income. If they take that away, I do not know what I will do,' she said.
The government insists it is committed to supporting small businesses, but the Treasury is under pressure to close tax gaps. The Office for Budget Responsibility estimates that the hidden economy costs the exchequer £5 billion annually. Cake sheds, though small in scale, are a visible target.
The debate encapsulates a broader tension: the desire to foster entrepreneurial creativity versus the need for fiscal rigour. As the cake sheds prove, innovation often flourishes in the margins. The question is whether Whitehall will let it remain there.
