Annual tax-free allowances for property or trading income
Do you know that you can get up to £1,000 in tax free allowances for property or trading income? You need to decide which is more beneficial to you by either calculating your taxable profits and deducting expenses from your gross trading receipts and income, or using the new allowance of up to £1,000 to be set against your gross trading receipts and income without claiming expenses.
More information on the allowance can be found here:
1) If your Trade or Property Income is £1000 or less.
You will not need to declare any trading income from self-employment and casual services, property income, or any of the expense associated with those receipts for the tax year in their Self-Assessment tax return. You would not meet the criteria for completing a Self-Assessment tax return if this was your only reason for completing a tax return, therefore, no election is necessary in these circumstances and you would automatically qualify for this relief and not have to pay tax.
2) If your Trade Income is £1000 or less.
You will still need to register for Self-Assessment if you: want to make a voluntary payment of Class 2 NIC for 2017/18; want to be eligible to claim Maternity Allowance for the self-employed; incur childcare costs and want to use this income to qualify for Tax Free Childcare; are a sub-contractor and want to claim for the tax deductions under Construction Industry Scheme (CIS). In these circumstances, you would need to complete the self-employment pages of the tax return and follow the instructions in the SA notes provided with the return.
3) If your Trade or Property Income is more than £1000.
You will need to declare and pay tax on your income if you have gross trading income from all sources of self-employment and casual services (other than employment) which totals more than £1000 and / or gross property income from all sources which totals more than £1000. You would complete a Self-Assessment tax return (unless your taxable profits from property or casual services are less than £2500 in which case you can declare and pay tax on this income via your PAYE tax code).
As mentioned, you can choose to either calculate your profits under the current rules, or you can elect to claim partial relief under trade and property income allowance. If you elect for partial relief you calculate your profits by deducting up to the £1000 allowance from your gross trading receipts and income from casual services and / or deducting up to the £1000 allowance from your property income. If you elect to calculate your profit using this method, you would be prevented from deducting any allowable expenses associated with the income the allowance is set against. If you deduct the trading allowance against the income of one of your self-employed trades, you will not be allowed to deduct any expenses from any of your self-employed trades.
Remember, it is very important to keep records if you are self-employed. For more information, see the following link: