TRADING AND MISCELLANEOUS INCOME
Most businesses start small with a few occasional sales. Only once the trader is convinced that they can deliver the product or service effectively do they launch their business properly.
The issue is deciding when trading officially began for tax purposes: was it when the first sale was made, or on a later date when a viable business seemed possible? This commencement date drives the deadline by which income from the new business must be reported to HMRC.
The trading and miscellaneous income allowance (TMIA) is there to help. The TMIA can cover up to £1,000 of trading or sundry income per tax year, meaning that income is not taxable and does not have to be reported on a tax return. It does not matter when the income was received within the tax year; as long as the total amount is less than £1,000 it will qualify for the TMIA. However this only applies for income received after 5 April 2017. Self-employed taxpayers must include income from all of their different trades and can only claim the TMIA if total sales are below £1,000.
If you have a hobby which is turning into a new business, please speak to us as soon as possible. If total sales are less than £1,000 there may be nothing to report, but once your business takes off you will need to have a system in place to record all the income and costs accurately.
This article is extracted from the September 2019 Newsletter.