The image shows irritated skin around the upper lip, mouth and chin, with redness, dryness, flaking, small pimples and some yellowish crusts.

While it’s not possible to diagnose a skin condition from a photo alone, this type of rash can indicate that the skin barrier is inflamed, irritated, or possibly infected. Because it’s located near the mouth and has crusting in some areas, it’s important to take it seriously and avoid making assumptions at home.
One possible condition that often causes concern when yellow crusts appear around the mouth is impetigo, a fairly common contagious skin infection. According to the Mayo Clinic, impetigo typically causes reddish sores around the nose and mouth that can break open, ooze, and then form a honey-colored crust. It can be spread through contact, towels, clothing, or scratching. The CDC also notes that impetigo lesions can appear around the mouth and nose and form yellow or “honey-colored” crusts.