£1000 Trading Allowance

[TB2019]

Hi,

I have been making some additional income from some IT work that I complete as a sole trader.

Am I correct in thinking that from 2017/2018 I can use the trading allowance of £1000 to deduct from my income before I work out how much tax to pay?

What is the process for amending a previous self assessment to claim this allowance for a previous year where it wasn't claimed?

Thanks

[robbob]

Yes you are correct presuming there is no related party restrictions that would apply.

You are within time limits to go back into 2018 tax return and amend the return submitted to the figures you want them to be.

Note couple of relevant warnings

1 you can't claim trading allowance AND expenses too - so if you have claimed expenses against income you would need to remove those expenses if you wanted to claim the £ 1000 allowance/exemption.

2 Note if you have 2 different sole trader businesses hmrc effectively treat this as one business for using the £1k - so if you have other self employed income on which you claimed expenses and £1000 of it sole trader income you cant use the allowance against the 1k income while you are claiming expenses against other sole trader trade.
Strewth

[TB2019]

Many thanks

Just to clarify also, when I add the income from the consultancy on the self assessment should I say yes to the self-employed question and add the income there or just under the Other Income section?

[robbob]

Just to clarify also, when I add the income from the consultancy on the self assessment should I say yes to the self-employed question and add the income there or just under the Other Income section?

If your income is below 1k limit no need to enter it at all

if you are unsure whether the business is a trade or not then i don't have an easy answer for you and there may not be an easy answer - if you set up with the intention of earning via self employment or the activity amount to self employment i would say self employed page - if some casual income came your way and you had no intention of trading. business and its a one off then possibly other income - your comments about sole trader suggest the the self employed box should be used.

Note if you are completing tax return boxes then for sole trader enter full sales and enter trading allowance claimed in the relevant box - and for misc other taxable income - you take off the 1k before entering the income.


from the notes page ref any other income box

Do not include any income from your employment, self-employment or capital gains, or any miscellaneous income exempted by the trading income allowance.

Example
Tony has self-employed income of £500 and
miscellaneous income of £800.As this income is over £1,000 it has to be reported in his
tax return.Tony puts £500 in box 9 (Turnover) and £500 in box
10.1 (Trading income allowance) of his Self-employment (short) pages.
Amount of allowance remaining = £500
Tony puts £300 in box 17 (£800 minus £500 (remaining
amount of trading income allowance))