Cash basis and trading allowance

Fairenough

Hello, I'm getting very confused with trading allowance and cash basis for my first self assessment. Hope you can help.

I work full time, so have declared this income and tax on the form (based on my P60).

In addition I made £1400 net selling things online - sole trader (£2440 gross). In addition I paid £100 for a software that I use for this activity only.

I also received miscellaneous £750 payment (casual earning). 

Initially I tried and filled out the form using traditional accounting and the amount shown for me to pay was around £430. I put £2440 gross revenue, £750 in the trading allowance and then £250 in the other UK income - to reach £1000. But I wasn't sure if this was what I'm meant to do (though that is what the example on the form seems to indicate).

Should I use cash basis instead? If so I would declare £1400 in net income as sole trader, but what about the rest? Can I use the trading allowance still? Do I write £1000, or £750? 

There is no example in this section saying to split the allowance. I tried it and the amount to pay came to £230. Would this be right?

[Deleted User]

You are getting confused. You can claim the trading allowance of £1000 OR the actual expenses, not both. 

So, if your turnover is £2440 and your expenses are £1040 , arriving at £1400 net profit, you cannot also claim the trading allowance. (You could declare turnover of £2400 and claim the trading allowance of £1000 but you would then have a net profit of £1440)

You seem to believe that the trading allowance is deducted from NET profit. 

Accordingly, you have £1400 profit and £750 casual income upon which you must pay tax. That’s £2150 total which, at 20%, would indeed be £430 tax payable. 

Fairenough

Thank you for your response.
Yes, the Cash basis got me confused, I thought it means quoting the net amount I received, but once I did this, on the form there still a box to add the trading allowance.

[Deleted User] said:

So, if your turnover is £2440 and your expenses are £1040 , arriving at £1400 net profit, you cannot also claim the trading allowance. (You could declare turnover of £2400 and claim the trading allowance of £1000 but you would then have a net profit of £1440)

...

Accordingly, you have £1400 profit and £750 casual income upon which you must pay tax. That’s £2150 total which, at 20%, would indeed be £430 tax payable. 

 
I'll use this. Thanks.