£1000 self employed without tax return

Freddythefearlessfish

I know that you can earn less than £1000 per year tax free from self employment without completing a tax return.  But that if you earn £1000 you need to complete a tax return.
https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return#:~:text=You must send a tax,can claim tax relief on)

What I'm unsure of is what happens if you earn £1001  

As I see it the options are:

You get taxed on the £1001 at your current tax rate, and you have to fill in tax returns for the next 5 years because you stupidly went over the limit once (ie "£200.20" for standard rate tax payers)

You get taxed on the £1 at your current tax rate, and you have to fill in tax returns for the next 5 years because you stupidly went over the limit once.  (ie "20p which will get written off but you'll have the inconvenience of completing tax returns for the next 5 years).

You get taxed this year, but wont have to complete a tax return in the future.

Any able to say with confidence?

Dazed_and_C0nfused

Freddythefearlessfish said:

I know that you can earn less than £1000 per year tax free from self employment without completing a tax return.  But that if you earn £1000 you need to complete a tax return.
https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return#:~:text=You must send a tax,can claim tax relief on)

What I'm unsure of is what happens if you earn £1001  

As I see it the options are:

You get taxed on the £1001 at your current tax rate, and you have to fill in tax returns for the next 5 years because you stupidly went over the limit once (ie "£200.20" for standard rate tax payers)

You get taxed on the £1 at your current tax rate, and you have to fill in tax returns for the next 5 years because you stupidly went over the limit once.  (ie "20p which will get written off but you'll have the inconvenience of completing tax returns for the next 5 years).

You get taxed this year, but wont have to complete a tax return in the future.

Any able to say with confidence?

Where have you got the 5 years but from?

Your Self Assessment calculation will include your taxable profit.

If you have turnover of £1,001 and don't claim any expenses (or the Trading Allowance) your tax calculation would include the £1,001 profit.

If you have turnover of £1,001 and claim expenses of £1,000 (or the Trading Allowance) your tax calculation would the include the £1 profit.

Why do you think the 20p would be written off 🤔

If you have PAYE income it's more likely to be £2 tax due on £1 profit 😳

Freddythefearlessfish

For the moment, I'm assuming no expenses, for simplicity.  I was only wondering whether you got £1000 write off because if you earn less than £1000 you don't pay any tax.

I would expect hmrc to write off the 20p, just on the basis that they usually seem to ignore pence.

My 5 years was an estimate based on how long after I sold our rental property and every year thereafter they required a tax return when the only figures were paye and interest from bank accounts.  I believe it was more than 5, I just know it was a serious hassle.

Dazed_and_C0nfused

Freddythefearlessfish said:

For the moment, I'm assuming no expenses, for simplicity.  I was only wondering whether you got £1000 write off because if you earn less than £1000 you don't pay any tax.

I would expect hmrc to write off the 20p, just on the basis that they usually seem to ignore pence.

My 5 years was an estimate based on how long after I sold our rental property and every year thereafter they required a tax return when the only figures were paye and interest from bank accounts.  I believe it was more than 5, I just know it was a serious hassle.

I don't know where you have picked that up from but your tax calculation will include your profits, whether they are £1 or £1,000.

The tax payable will depend on what other taxable income (and types of income) you have.

If your business ceases and you notify HMRC of this there should be no reason why you need to complete tax returns for later years.  Although filing at the last minute may not help things.

Freddythefearlessfish

Perhaps I'm not being clear, I'm talking about someone with a real job paying PAYE, who then does a little bit of a sideline that generates some extra cash.  If that cash is less than £1000 they don't have to declare it, if that is more than £1000 then they do.  So if they earn £900 in their cash in hand, side line then they pay no additional tax legitimately, however if they earn over £1000 in the side line then they should complete a tax return and ultimately pay additional tax.

So it was meant to be quite a simple question, assuming for simplicity that the person pays tax at the standard base rate ie 20%, how much tax will they have to pay if they make £1001 (and are honest and declare it to HMRC).  

Just hoping someone would know the answer.

Dazed_and_C0nfused

Freddythefearlessfish said:

Perhaps I'm not being clear, I'm talking about someone with a real job paying PAYE, who then does a little bit of a sideline that generates some extra cash.  If that cash is less than £1000 they don't have to declare it, if that is more than £1000 then they do.  So if they earn £900 in their cash in hand, side line then they pay no additional tax legitimately, however if they earn over £1000 in the side line then they should complete a tax return and ultimately pay additional tax.

So it was meant to be quite a simple question, assuming for simplicity that the person pays tax at the standard base rate ie 20%, how much tax will they have to pay if they make £1001 (and are honest and declare it to HMRC).  

Just hoping someone would know the answer.

Unless they are Scottish resident for tax purposes £202.00.

If their turnover is £1,001 they claim the Trading Allowance so they make £1 then their tax liability will most likely be £2.00.

Bookworm105

Freddythefearlessfish said:

Just hoping someone would know the answer.

the question has been answered several times already
for a person with a sideline on top of a "main income" then, as your question shows, they would claim the £1,000 trading allowance and so only pay tax on the amount in excess of £1,000
the tax due on that would be reflected in their tax code for the forthcoming year, it may therefore indeed round down to £0 if it was genuinely 20 pence (or 40p) of tax due on the £1.
 

LITRG

Hello. We are the Low Incomes Tax Reform Group (LITRG), part of the Chartered Institute of Taxation who are an educational charity. We are not part of HMRC or MSE. Although we can’t give individual advice, you might find our website information about partial relief under the trading allowance useful :https://www.litrg.org.uk/working/self-employment/trading-allowance#3

 If you require further help, we recommend that you contact a tax adviser, HMRC or one of the tax charities where relevant. You can find more information about where to get help with tax here: https://www.litrg.org.uk/tax-nic/getting-help-tax. Thanks.