We are now contacting our clients to request the appropriate information for the completion of personal tax returns for the year ended 5 April 2018.
There are two new allowances for the 2017/18 tax year and it is important that you let us know the appropriate information to enable us to claim them on your behalf if necessary.
The two allowances both amount to £1,000 and apply to trading income and property income. The allowances have been introduced as a response to the rise of online platforms such as Ebay and AirBnB, but could cover any sort of rental (but see below regarding income from a lodger) or trading income.
However the application of the new rules is not straightforward:
- The allowance relates to your takings, and not your profit.
- If your takings are below £1,000 then the income is exempt from income tax
- If your takings exceed £1,000, then the amount liable to income tax can be calculated in one of two ways:
o Your takings less £1,000 or
o Your takings less actual expenses
o This can be decided on a year by year basis
- Neither allowance is available against income received from your employer.
An extra quirk is that the property allowance cannot be added to the “Rent a Room” allowance, which is available to cover rental income from a lodger living with you in your home.
It should also be noted that the trading allowance applies to all income from self-employment (but not partnership). So, if you are in business by yourself as, say, a consultant, but also work as a musician, then the turnover from both businesses has to be combined to see if you exceed the £1,000 turnover limit.
If you have been receiving such income you should have been advising us each year, in which case we will automatically apply the allowance as appropriate. However, if you have overlooked the income, perhaps due to its negligible level, now is a good time to inform us so we can ensure that matters are in order going forward.
Please contact us if you have any queries on: 0191 281 8191.