Personal savings allowance and staying out of higher rate tax band

pecunianonolet

spider42 said:

qbadger said:

My understanding is that what they actually mean here is, taxable income less Personal Allowance and less reliefs (expenses). Tax-free allowances such as PSA, dividend allowance, trading and property allowances are not to be included in this calculation to determine whether we are basic/higher/additional rate payer.

Not quite. PSA and dividend allowance are nil rate of tax, and don't reduce taxable income. But the trading and property allowances don't work in the same way and do reduce taxable income.

Regarding trading allowance, I am confused. If I have sold things on ebay worth £500, does that reduce my taxable income if I tell HMRC about it, even if they say that you don't have to tell them if you are below £1000 or how would that work?

spider42

pecunianonolet said:

spider42 said:

qbadger said:

My understanding is that what they actually mean here is, taxable income less Personal Allowance and less reliefs (expenses). Tax-free allowances such as PSA, dividend allowance, trading and property allowances are not to be included in this calculation to determine whether we are basic/higher/additional rate payer.

Not quite. PSA and dividend allowance are nil rate of tax, and don't reduce taxable income. But the trading and property allowances don't work in the same way and do reduce taxable income.

Regarding trading allowance, I am confused. If I have sold things on ebay worth £500, does that reduce my taxable income if I tell HMRC about it, even if they say that you don't have to tell them if you are below £1000 or how would that work?

Without the trading allowance, your taxable income would be £500 (or more accurately £500, less the costs incurred in buying the items and any selling costs incurred). If you claim the trading allowance, then it reduces your taxable trading income to nil.

But also bear in mind that selling things on eBay will only be taxable if you are trading, in other words buying things specifically to resell them at a profit. If you are just selling some old personal items you no longer want, then that isn't taxable anyway, even if it is over £1,000.