In a previous blog, I explained who might need to complete a self‑assessment tax return. This time, let’s look at the situations where you may not need to file one.
Small Traders and HMRC
HMRC has been encouraging small traders to register as businesses, particularly those selling through platforms like Airbnb, Etsy, or eBay. But not everyone with a side hustle or hobby automatically needs to complete a tax return.
Take my friend Amanda, for example. She runs Pandablue Creations, selling lino prints she makes in her spare time. Her turnover is only a few hundred pounds, so she asked whether she needed to file a tax return...
The £1,000 Trading and Property Allowances
Since 2016, HMRC has allowed individuals to earn up to £1,000 from either property rental or small trading without paying tax - or even declaring it.
That means if Amanda’s only income is from her lino prints, and it’s under £1,000, she doesn’t need to complete a tax return.
When Income Is Over £1,000
If you earn more than £1,000, you can choose how to report it:
- Use the allowance: Deduct £1,000 and pay tax only on the remainder. For example, if you earn £1,100, you’d only pay tax on £100. This is simple and avoids the need to calculate exact expenses.
- Declare actual costs: If your expenses are high, it may be better to declare them instead of using the allowance. For instance, if Amanda earns £2,000 but spends £1,800 on materials, travel, and postage, her profit is only £200. Declaring costs means she pays tax on £200 rather than £1,000.
Declaring Losses
Even if your income is under £1,000, there can be reasons to file a tax return. If you’ve made a loss - perhaps from start‑up costs like equipment, software, or franchise fees - you can declare it. That loss can then offset against future profits, reducing your tax bill when your business grows.
Questions?
If you have any questions at all, please do not hesitate to get in touch with Anderson Accounts as we will be happy to help.
