Self-assessement - Cash basis and trading allowance

Fairenough

Hello,

I hope someone can help as I'm not so sure how trading allowance works with Cash basis for Self-assessment. 

I made £1400 net selling things on Etsy - sole trader (£1950 gross - Etsy fees £550 ). 

In addition, I paid £100 for a software and £600 for a laptop I use for these activities only.

I want to declare my earnings using cash basis.

Can I use the £1000 trading allowance still? Or should I put down £700 expenses?

soolin

You can use either the £1000 trading allowance, or claim expenses whichever is higher. The figure for income though will be the total amount £1950 as it is gross of all expenses and should include everything including the postage collected from the buyer. 

You will also have to wait for those who are more up to date than me to advise on the capital expenditure, as when I last worked you couldn’t claim the full cost of capital purchases like the laptop if you used cash basis of accounting. 

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 trading allowance useful:  https://www.litrg.org.uk/working/self-employment/trading-allowance#3  and using the cash basis: https://www.litrg.org.uk/working/self-employment/calculating-self-employed-profits/accounts-cash-basis . 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.

Fairenough

Thank you both. Much appreciated.