Small amount of trading, casual or property income – check if you need to send a tax return this January!

Published on 17 December 2018

LITRG are reminding people who have earned a small amount of income through self-employment, casual work, the sharing economy or from any property they own (such as renting out a driveway), that they may not need to inform HMRC or pay any tax on that income because of two new allowances, the Trading and Income Allowance (known as the 'Trading Allowance') and the Property Income Allowance. These new allowances were introduced for the 2017/18 tax year and each allowance can reduce taxable income by up to £1,000.

Those who are completing self assessment tax returns for 2017-18 are likely to be coming across these allowances for the first time and may have questions about how they work. The trading and income allowance (also called the ‘trading allowance’) is explained in detail in our new ‘Trading Allowance’ factsheet, and we explain how the property allowance works on our ‘renting out a property’ page.

These two new allowances mean taxpayers may receive up to £1,000 of each type of income tax-free. In certain circumstances taxpayers can make use of both allowances. Where their property, trading or miscellaneous income is more than £1,000 they can choose to either claim the relevant allowance and pay tax on the excess income or, instead, deduct actual business expenses.

This means that if you have trading or casual income and/or property income below £1,000 in the 2017/18 tax year then as long as there are no other reasons to complete a tax return and you have not been sent a notice to file a tax return then you do not need to complete one. If you have been sent a notice to complete a tax return, then it is your responsibility to contact HMRC and check if you still need to submit one due to the new allowance(s).  If you have received a notice to file from HMRC and do not submit a tax return before the due date (which was 31 October 2018 for paper tax returns or 31 January 2019 for tax returns which are filed online) then you could be subject to late filing penalties even if there is no tax to pay.

If you have small amounts of trading, casual and/or property income then you should consider these new allowances, however it may not always be beneficial to use them; and in certain circumstances, you may still want to complete a tax return even if the relevant income is fully covered by these allowances.

Our factsheet explains more about this in the context of the trading allowance, and it also covers the following questions:

  • Who can use the trading allowance?
  • What to do if you have trading income less than £1,000?
  • How does the trading allowance work if you have trading income above £1,000?
  • What business records should you keep if you are using the trading allowance?
  • What to do if you claim the trading allowance and want to pay voluntary Class 2 National Insurance contributions?
  • What if you are claiming tax-free childcare?
  • How does the trading allowance work with tax credits and universal credit?

The factsheet can be found here: Trading Allowance factsheet

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