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Allowable Costs for Self Assessment

I’ve got a small hobby income which has trickled over £1000 revenue threshold in 2020/21. I believe I need to record & report profit for tax purposes now.
The hobby is a very small website with a mix of articles and reviews which generates income from adverts and commissions.
If I have bought products in the year which I have reviewed or used to create content would these costs be allowable for SA purposes?
Thanks
«1

Comments

  • Would you not be better claiming the trading allowance?

    https://www.litrg.org.uk/tax-guides/self-employment/what-trading-allowance
  • unholyangel
    unholyangel Posts: 16,866 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I'd be careful about calling it a hobby - no tax relief is due on hobbies. 
    You keep using that word. I do not think it means what you think it means - Inigo Montoya, The Princess Bride
  • Jeremy535897
    Jeremy535897 Posts: 10,752 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    I'd be careful about calling it a hobby - no tax relief is due on hobbies. 
    No tax is due on them either. HMRC only classify a trade as a hobby when you are trying to claim trading losses from the trade against other income, and they do that on the basis that the trade is not carried on commercially with a view to profit (section 66 ITA 2007). It sounds as if this is a case to claim the £1,000 trading allowance (as per Dazed's post).
  • unholyangel
    unholyangel Posts: 16,866 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I'd be careful about calling it a hobby - no tax relief is due on hobbies. 
    No tax is due on them either. HMRC only classify a trade as a hobby when you are trying to claim trading losses from the trade against other income, and they do that on the basis that the trade is not carried on commercially with a view to profit (section 66 ITA 2007). It sounds as if this is a case to claim the £1,000 trading allowance (as per Dazed's post).
    Not disputing that it probably is trading. Just warning the OP against their current phrasing
    You keep using that word. I do not think it means what you think it means - Inigo Montoya, The Princess Bride
  • Jeremy535897
    Jeremy535897 Posts: 10,752 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    I'd be careful about calling it a hobby - no tax relief is due on hobbies. 
    No tax is due on them either. HMRC only classify a trade as a hobby when you are trying to claim trading losses from the trade against other income, and they do that on the basis that the trade is not carried on commercially with a view to profit (section 66 ITA 2007). It sounds as if this is a case to claim the £1,000 trading allowance (as per Dazed's post).
    Not disputing that it probably is trading. Just warning the OP against their current phrasing
    I take a more relaxed view, as if it really was a hobby, there would be no tax implications at all.
  • Thanks for the responses - seems I have found the right place to start with these queries :)

    I used the term hobby offhand, I was trying to infer it is not a main income source. Noted that I should be cautious with language. 

    For the avoidance of doubt I have set up and continue to maintain these websites with the aim of becoming revenue generative.

    That said due to other income it’s my preference to keep profits sufficiently low they are untaxed, or reinvest in equipment or materials to keep profits under the £1000 if I can in the near term.

    I did look at the trading allowance but it leaves a material enough portion of income to be taxed that I am looking at alternatives too.

    I then thought I may be better off purchasing more items to review to grow the site faster if these can be classed as deductible expenses. As these items generally are fairly expensive this would dampen profit in the short term while giving me an asset (web content) to earn from point forward.
  • unholyangel
    unholyangel Posts: 16,866 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 12 February 2021 at 5:43PM
    Thanks for the responses - seems I have found the right place to start with these queries :)

    I used the term hobby offhand, I was trying to infer it is not a main income source. Noted that I should be cautious with language. 

    For the avoidance of doubt I have set up and continue to maintain these websites with the aim of becoming revenue generative.

    That said due to other income it’s my preference to keep profits sufficiently low they are untaxed, or reinvest in equipment or materials to keep profits under the £1000 if I can in the near term.

    I did look at the trading allowance but it leaves a material enough portion of income to be taxed that I am looking at alternatives too.

    I then thought I may be better off purchasing more items to review to grow the site faster if these can be classed as deductible expenses. As these items generally are fairly expensive this would dampen profit in the short term while giving me an asset (web content) to earn from point forward.
    The £1000 limit is turnover, not profit. It's set at £1000 because even if your expenses are less than £1000, you can claim the trading allowance which would mean no tax due on your £1000 (or less) turnover.

    Over £1000 of revenue, you need to register for self assessment and can claim trading allowance to give tax relief on £1000, or can claim actual expenses if your actual expenses are more. 
    You keep using that word. I do not think it means what you think it means - Inigo Montoya, The Princess Bride
  • Thanks for the responses - seems I have found the right place to start with these queries :)

    I used the term hobby offhand, I was trying to infer it is not a main income source. Noted that I should be cautious with language. 

    For the avoidance of doubt I have set up and continue to maintain these websites with the aim of becoming revenue generative.

    That said due to other income it’s my preference to keep profits sufficiently low they are untaxed, or reinvest in equipment or materials to keep profits under the £1000 if I can in the near term.

    I did look at the trading allowance but it leaves a material enough portion of income to be taxed that I am looking at alternatives too.

    I then thought I may be better off purchasing more items to review to grow the site faster if these can be classed as deductible expenses. As these items generally are fairly expensive this would dampen profit in the short term while giving me an asset (web content) to earn from point forward.
    The £1000 limit is turnover, not profit. It's set at £1000 because even if your expenses are less than £1000, you can claim the trading allowance which would mean no tax due on your £1000 (or less) turnover.

    Over £1000 of revenue, you need to register for self assessment and can claim trading allowance to give tax relief on £1000, or can claim actual expenses if your actual expenses are more. 
    Thanks for the response!

    For me actual expenses would be higher if I can claim the cost of products bought to review.

    Otherwise the £1000 is probably higher.

    Do you have any thoughts on if these product costs would be allowable?

    Next step is probably contact a local accountant for some help by the sounds of things!
  • Nearlyold
    Nearlyold Posts: 2,391 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper Combo Breaker
    What happens to the Products after you've reviewed them, are they effectively destroyed in the review process and disposed of, or do you keep and use them for a non business or business related purpose, or do you sell them on? 
  • Jeremy535897
    Jeremy535897 Posts: 10,752 Forumite
    10,000 Posts Fifth Anniversary Photogenic Name Dropper
    You can deduct the cost of goods purchased to review. If you get to keep the products you have reviewed, or you give them away to family or friends, you treat their second hand value as income. If you sell them later, you also treat the sales proceeds in excess of the second hand value as income (or deduct any loss).
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