Newsletter issue - November 2018.
The introduction of the new trading and property allowances for 2017/18 onwards mean that those with low levels of income from these sources may not need to report it to HMRC.
The trading allowance is £1,000 for 2017/18 and 2018/19. Broadly, those with trading income of less than £1,000 a year, no longer need to report it to HMRC. This may be particularly useful for people with casual or small part time earnings from self-employment, for example, someone who up-cycles old furniture for resale on eBay or similar.
Where the trading income is more than £1,000, the trader has the choice of either deducting the £1,000 allowance from income to arrive at the taxable profit, or computing profits in the usual way by deducting actual expenses.
Practical implications of the allowance include:
Example - Mary's bake-off
Mary enjoys baking and makes celebration cakes in her spare time, which she sells to family and close friends. In 2017/18 her income from cake sales was £800 and her expenditure was £150. As her trading income is less than £1,000, she does not need to report it to HMRC.
Example - Marty's memorabilia
Marty is an avid collector of sporting memorabilia but he regularly sells items he no longer wants and duplicate items via an online member's forum. In 2017/18, his income from sales was £1,500 and his expenditure was £450.
As Marty's expenditure was less than £1,000, it will be beneficial for him to claim the trading allowance. His taxable profit will be £500 (£1,500 less the trading allowance of £1,000).