I’ve got good news for you if you make a small amount of money from blogging, selling on Depop and eBay or another hobby. You might not need to do a tax return anymore…
What is the trading allowance?
In short, if you make less than £1,000 from self-employment or renting out your property during the tax year you no longer need to register as self-employed with HMRC or pay tax on the money you earn.
This allowance was brought in by HMRC for the 2017-18 tax year in order to simplify things for people who earn a small income from “hobbies” - for example blogging, selling clothes on eBay or making goods to sell on Etsy
What do I need to do if I’m already registered as self-employed but earn less than £1,000?
When you file your next tax return, you’ll be asked if you have earned over £1,000 during the tax year through self-employment. If you answer “no”, you won’t need to complete the self-employment section of your tax return and you can de-register for Self Assessment tax if you aren’t expecting to make £1,000 from self-employment next year. You’ll still need to record your income and expenses in case you go over the threshold or HMRC ask to see evidence of your earnings.
If you have another business, or are registered for Self Assessment for another reason, such a being a landlord, you will need to remain registered as self-employed and declare your income, but you won’t need to pay tax on the self-employment income that makes less than £1,000.
Is the trading allowance right for me?
The trading allowance is only available to individuals who are eligible to use cash basis accounting. If your income is from employment, a partnership or a limited company you will not be eligible to claim the trading allowance.
If you plan to keep earning less than £1,000 from self-employment, the trading allowance will probably benefit you.
If your income was less than £1,000 because your business is new and you’re planning to make more than that amount next year, the trading allowance probably won’t be of much use to you, as you can’t claim expenses and the trading allowance. If your business expenses were higher than your profit, you can bring this loss forward to be taken off your next tax bill.
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