Side hustle profit below £1k

Bookworm225

Millie_moo_muff said:

Brie said:

Millie_moo_muff said:

Hi, when I checked on the gov website as to filling a self assessment it said I didn’t need to as profits below £1k.

I contacted citizens advice and got same info re doing a return 

It might depend on what you asked about or what you found on the gov site.  If it's interest under £1k I believe you don't need to pay tax.  Likewise if it's selling bits on ebay/vinted etc up to £1k there's no tax.  But if you are employed, by someone else or self employed, it's income not a side hustle and therefore subject to being taxed.

Have you added up the amounts to see if there is actually any tax that might be payable?  I mean if you're still below the tax threshold there's nothing to worry about.  

I do exam prep tuition, and initially it won’t have gone over the £12570, but recently (last two years I think due to pension increases) it will have put me over combining the two. 

It was the terminology that confused me profit/income ….. didn’t realise there was a distinction. 

As I have pension gaps it benefits me to be self employed to pay class 2 stamp. Obviously happy to pay any tax owed just hope I don’t get blasted with fines for being uninformed and misunderstanding the difference between profit and income 

technically the £1,000 trading allowance is a deduction from your income when calculating your profit

the sole point of it is it allows you the option of not having to keep detailed records of a "trivial" level of expenditure. Clearly therefore if your expenses are more than 1K you do not claim the allowance, you claim actual expenses instead as that would reduce your profit and this give you more tax relief than declaring a higher profit from claiming only 1k of expenses.

mathematically therefore the trading allowance means if income is 1k and you claim the allowance you have £0 taxable profit. But income £1,001 less allowance you have £1 of taxable profit.

examination marking is technically a self employment activity and therefore, provided your taxable profit is >£0 you should be registered as SE, You can of course however voluntarily register as SE if you made a loss (but you cannot use the trading allowance to make a loss, a loss can only come from using actual expenses in the profit calculation) so as to be able to pay Class 2 on a voluntary basis if you wish. 


so in your case what is the total of your gross pension plus your SE taxable profit???
if that is >12,570 then you owe tax on it 

Bookworm225

for avoidance of doubt, if your actual expenses are less than 1k, you would naturally claim the 1k trading allowance so as to reduce your taxable profit. The clealr point being it is to your advantage if you have an "excess" between actual expenses and £1k allowance as that is in effect a tax free gift from HMRC as it saves you tax on a bit of your income since your profits are reduced for tax purposes to a figure than is lower than what you actually made . 

income 1200 less actual expenses 800 = taxable profit 400 
income 1200 claim allowance instead = taxable profit 200

Millie_moo_muff

Bookworm225 said:

for avoidance of doubt, if your actual expenses are less than 1k, you would naturally claim the 1k trading allowance so as to reduce your taxable profit. The clealr point being it is to your advantage if you have an "excess" between actual expenses and £1k allowance as that is in effect a tax free gift from HMRC as it saves you tax on a bit of your income since your profits are reduced for tax purposes to a figure than is lower than what you actually made . 

income 1200 less actual expenses 800 = taxable profit 400 
income 1200 claim allowance instead = taxable profit 200

Bookworm225 said:

for avoidance of doubt, if your actual expenses are less than 1k, you would naturally claim the 1k trading allowance so as to reduce your taxable profit. The clealr point being it is to your advantage if you have an "excess" between actual expenses and £1k allowance as that is in effect a tax free gift from HMRC as it saves you tax on a bit of your income since your profits are reduced for tax purposes to a figure than is lower than what you actually made . 

income 1200 less actual expenses 800 = taxable profit 400 
income 1200 claim allowance instead = taxable profit 200

I’m very confused now. I do tuition, I don’t trade. I have minimal expenses to offset. The guidance for returning a self assessment advised that I did not need to do a self assessment as I made less than £1k a year. I took this to mean that it was an allowance that covered people who might buy/sell on eBay, sell homemade cakes at a sale, make bird houses to sell at local fete etc, 
when I read on the gov website the details for tuition indicated that if I made over £1k I’d need to do a self assessment otherwise not.
So I’m not looking to offset any tax as I have a £12570 taxable allowance which I’m under even including my extra tuition work 

Bookworm225

Millie_moo_muff said:

I’m very confused now. I do tuition, I don’t trade. I have minimal expenses to offset. The guidance for returning a self assessment advised that I did not need to do a self assessment as I made less than £1k a year. I took this to mean that it was an allowance that covered people who might buy/sell on eBay, sell homemade cakes at a sale, make bird houses to sell at local fete etc, 
when I read on the gov website the details for tuition indicated that if I made over £1k I’d need to do a self assessment otherwise not.
So I’m not looking to offset any tax as I have a £12570 taxable allowance which I’m under even including my extra tuition work 

but you ARE trading. The word is used to describe anyone who has income that they generated by their own actions, whether that be by selling goods, or as in your case, by selling your own time.

you are "trading" for your own benefit as a self employed tutor

as mentioned in the first reply in this thread, the self employed add their profits to their other sources of taxable income and pay tax on the total if that is above the personal allowance. 

gross pension + tutor profit (ie: tutor income - trading allowance) = total income  £X
total income £X - personal allowance £12,570 = total taxable income £Y 

if £Y is 0 then there is no tax to pay.

I'll leave it at that as more complex aspects of being self employed appear to be too much at this stage 

Bookworm225

Millie_moo_muff said:

Dazed_and_C0nfused said:

Millie_moo_muff said:

Brie said:

If pension + side hustle is more than the tax threshold then tax needs to be paid on that bit.   

So I guess I’m going to get hit by late fees etc or is there a case that I’d misunderstood?

You cannot be fined for not filing a tax return you haven't been asked to complete.

When a return is issued you will have 3 months to file it.

But the payment date for any tax owed does not change so you could expect to be charged interest on anything paid late.

Other penalties could come into play but the sooner you sort things then less likely they are going to be an issue.

Thanks, I’ve calculated that it’s only this most recent year that I’m over the £12560 and I have plenty of time to square that. It’s really just trying to marry up qualifying for class 2 to fill pension gaps and the self assessment requirements. And of course the deadline !!

do you now understand that it is: pension + tutor profit - 12,570 that gives you total taxable income

if that is as say more than 12,570 then you have to pay some tax and will need to register for self assessment to do so

Even so, as you have also mentioned you want to pay Class 2 NI on a voluntary basis, the only way to do that is by doing a tax return - you can register for self assessment even if there is no tax to pay just so you can then pay Class 2 NI