Skip to main content

This is a new service – your feedback will help us to improve it.

Posted Tue, 17 Sep 2024 02:12:02 GMT by Daniel Fourier
My live-out landlady pays me to do some bits around the house because easier than getting someone to come do the work. I want to use the Trading Allowance. Two examples I want to ask about: (1) ordering and installing home appliances - if she wants a new appliance installed in the house, she asks me to buy it and assemble it, then she pays me back for it (at the exact same price I paid for it) and pays me some extra money to cover my labour. The labour is clearly income counting towards the Trading Allowance, but does the cost of me buying the appliance (which she then reimburses me for at the exact cost) count towards income for the purpose of the Trading Allowance? E.g. say this happened 8 times during a tax year, each appliance costs £200, so £1600 total, I get paid £10 per time for my labour, do I have any taxable income after consideration of the Trading Allowance? The rules forbid claiming "expenses" simultaneously with the £1000 allowance, but this is not so much expenses as being reimbursed for something bought for someone else. (2) Similar but different: topping up the electricity meter for her. I top up the meter, then she bank transfers me back the amount of electricity I put on (say it's again £200) plus £10 for my trouble. Again, if this were to happen 8 times in a year, if using the Trading Allowance, is my gross income £1,680 or £80? Do I have any taxable income resulting from this? I can see that obviously these would be additive so assume for purpose of this question that only one of these examples is happening in a given tax year. It would seem nonsensical to me if buying an appliance (or electricity topup) for someone who then reimburses you (with no extra £ on top) that this counts as gross income.
Posted Wed, 25 Sep 2024 18:54:24 GMT by HMRC Admin 20 Response
Hi,
If you are trading as self employed, you either claim the trading income allowance or claim deductions for expenses, but not both.  
As a sole trader, you are buying stock (the white goods if you will) and selling the stock at a price that includes the cost of the goods and labour.  
The annual cost of goods and labour, is your gross turnover.  It is from the gross turnover, that you deduct the trading income allowance or the expenses, but you cannot claim both.  
It would be the same with the electricity.  If your gross turnover exceeds £1000 in a tax year, you meet the criteria for completing a self assessment tax return.  
Alternatively, if you have to complete a self assessment tax return, you can enter the labour payments and other payments for your trouble in boxes 17 to 21 of SA100.  
Have a look at the notes at Tax Return notes Tax year 6 April 2023 to 5 April 2024 (2023–24).  
Please also note the guidance on record keeping at Business records if you're self-employeds.  
If you do not need to complete a tax return, then you will need to declare in writing each year, your miscellaneous income, such as casaul earnings.
Thank you.

You must be signed in to post in this forum.