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Perhaps you’ve just become self-employed and want to know when to file for Self Assessment? Or whether you’re entitled to any full or partial tax reliefs?
Either way, you’ll want to read more for a complete breakdown of the Trading Allowance!
First of all, what is the Trading Allowance?
If you’re self-employed, you can get up to £1,000 each tax year without having to pay income tax or national insurance contributions. This is called the Trading Allowance.
In much simpler terms:
⚠️ Bear in mind though, if you claim the Trading Allowance of £1,000, you won’t be able to claim any other self-employment allowances (like mileage, home office, etc.) and you won’t be able to claim business expenses. ⚠️
The Trading Allowance isn’t limited to those with a limited company. Here are some others who can claim the Trading Allowance:
Landlords are usually entitled to a similar allowance on property income. This is also a cool £1000, so if you have both types of income, you’ll get a £1,000 allowance for each. Sounds good to us!
Whether you submit a Self Assessment tax return depends on how much you earn from self-employment.
If your income from self-employment is under £1,000 and you don’t have another reason to file a tax return such as employment income over £100k, then no. You don’t even have to register for self assessment in this case.
On the other hand, if your gross trading income is over £1,000, then you will need to report this income to HMRC by completing a self assessment.
On your Self Assessment, you should deduct the Trading Allowance and tick the box to ensure HMRC are aware that you are doing so.
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