A trading allowance is a common deduction that allows people to claim an exemption of up to £1,000 in trading, casual or miscellaneous income per tax year. The terms "trading", "casual" and "miscellaneous" are fairly nebulous and could potentially refer to income from any number of sources, including part-time hobbies.
For example, a person may enjoy making candles in their spare time and then sell some of them at a local market. In that case, their earnings, up to £1,000 would be tax exempt. But because this is not an automatic deduction you will need to make the effort to claim it on your tax return.
Calculating your trading, casual or miscellaneous income is a very straightforward process. If, for instance, you made £400 from selling the aforementioned candles, plus you made another £350 by way of a car boot sale, your total trading income would be £750 and the entire amount could be claimed as a deduction. Just note that it’s important you account for the total gross trading income. Not the net amount.
If the £750 is your only income for the year you will not have to claim the trading allowance because it doesn’t reach the taxable income threshold. Attempting to claim the trading allowance then would be unnecessary and redundant.
MTD
