Self-employment, Other Taxable Income Question

[ladylines]

Hi,

I have a question on "Other Taxable Income". The instructions states "certain miscellaneous income are no more than £1,000 they are exempt from tax and do not need to be reported on a tax return".

My question is this, say the "Other Taxable Income" went over the £1000 and (for example) came to £2000. Say also that the personal allowance and lower rate tax was already used up in PAYE employment and so all other income is in the 40% bracket. Then how is the £2000 of Self-Employment income taxed, is it;

a) 40% on the whole £2000, tax due being £800. Declare £2000 on the tax return.
b) 40% on anything over £1000, tax due being £400. Only declare the additional £1000 on the tax return.
c) 40% on anything over £1000, tax due being £400. Declare £2000 on the tax return but only pay £400 tax on it.

If it is a) then then it doesn't make sense because that way, £1000 of casual earnings is tax free, giving a net trading income of £1000, but £1001 would cost £400.40 tax giving a net trading income of £600.40.

Any clarification appreciated,
Thanks.

[pawncob]

HMRC helps with this:
From 6 April 2017 receipts from self-employment and miscellaneous income of £1,000 or less are exempt from tax and don’t need to be reported on a tax return. Individuals with total receipts of more than £1,000 can elect to calculate their taxable miscellaneous income by deducting the allowance of up to £1,000 instead of those expenses that had to be spent to earn this income. If, however you’ve already claimed part or all of your £1,000 trading income allowance against self-employed income then it is the unused amount, if any, that can be deducted to determine the taxable miscellaneous income.

https://www.gov.uk/government/publications/other-taxable-income-hs325-self-assessment-helpsheet

So I guess you use the allowance and include £1000 as the income.(b)

[jerome.lane]

In this scenario, you would show £2,000 of s/e income on the TR and claim the £1,000 trading allowance, giving £1,000 taxable.
Where turnover is more than £1,000, the trading allowance is a fixed deduction you can claim instead of your actual expenses.
So if you had allowable expenses exceeding £1,000 you would instead include them.

[ladylines]

That's great. I was getting confused between self-employment and casual income (other taxable income). Ultimately, I think if I earn irregular, small amounts of ad-hoc income, then it counts of casual income, but if it becomes regular and heads towards being a business, then I move toward self employed, which is ultimately where I want to get to. And earning over £1000 is fine because the "trading income" allowance spans both self-employment and casual income. Unfortunately, my graphics and design business currently stands at exactly zero profit with no income as yet, but the only way is up! Thanks all.

Note the helpful links for self-employment/casual income and tax free allowances where these;

https://www.gov.uk/government/publications/other-taxable-income-hs325-self-assessment-helpsheet
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income