The new £1,000 tax free trading allowance

The new £1,000 tax free trading allowance is available from 6th April 2017. This covers small amounts of trading and miscellaneous income from providing goods, services or other assets.

The trading allowance provides a complete exemption from income tax if the total trading and miscellaneous income in the year is less than £1,000. Aswell as no income tax to pay, there is also no requirement to register with HMRC or file tax returns, as long as the income does not exceed £1,000.

If the income increases above £1,000 then you will be subject to self assessment.

The £1,000 threshold applies to income only, not profits.

Where the trading income exceeds £1,000 then you can have partial relief. Individuals can choose to either:

– deduct the business expenses from trading income in the normal way, or
– elect to deduct the £1,000 trading allowance from the income.

If you choose to deduct the £1,000 allowance then you can’t deduct any other expenses.

You can decide each year which approach to take.

There are some exclusions of the trading allowance;
– the trading allowance can’t be claimed for partnership trades, or for rent a room relief income.

– no relief is available if an individuals’s trading income includes any amounts received from:
– an employer, or spouse/civil partner’s employer
– a partnership in which they (or a connected party) are a partner; or
– a close company in which they (or an associate) are a participator

For the trading allowance the income and profits of all an individual’s trades are combined.