£1000 trading allowance

This allowance is for your self employed income which you declare on the self assessment pages of your tax return. What you earn from employment and PAYE has nothing whatsoever to do with it.

This allowance is quite useful for those of us who have low amounts of self employed income. It means that you don't have to declare your expenses and if these are less than £1000 you gain by paying less tax.

The £1,000 can also be viewed as an amount to cover the costs of running a small business, so rather than keeping proper records of expenses and going through the research/stress of trying to work out what's allowable, proportions of home costs, keeping mileage records, splitting phone/broadband bills, etc., "let's just call it £1,000 instead" which makes it easier for both HMRC and the taxpayer.

Most genuine small businesses and start ups will have at least £1,000 in allowable expenses, so if income was £1,000 or less, you deduct the £1,000 of expenses, so no profit. It makes more sense if you think in those terms.

Also remember, the £1,000 is against only the business income, you can't set it against other income such as employment wages, so if you've had sales of under £1,000, you can't fully use the £1,000 allowance anyway.

If you have more than £1,000 in expenses, you'd be best claiming the exact amount instead, and if sales are low, you may create a trading loss which CAN be set against employment income, so sometimes, claiming the £1,000 allowance may be counter-productive.

rickyroma wrote: »

I'm aware a sole trader can claim £1000 trading allowance per year but is it only for people who have no other income?
Me and my partner both work and pay tax through PAYE. If she were to set up a small craft business would she still get the £1000 tax allowance?

For everyone, employed or not. Yes she could choose the trading allowance but I would keep normal accounts (accruals or cash) anyway then work out which is most advantageous.