Side Hussle. Tax?

Perhaps you had space to branch out during lockdown: What’s the position with tax?

Trading?

It can be difficult sometimes to know where a hobby stops, and a trade begins. But where there’s any question of additional income, it’s not always appreciated that HMRC may need to be told. 

The questions HMRC will have are: has this person effectively set up a business, and does this amount to trading income or property income? To decide, there are particular signs HMRC looks for. These are sometimes called the ‘badges of trade’. They include the intention to make a profit, the number of transactions, and the way sales are carried out. 

We are happy to advise whether income should be disclosed, and if so, the appropriate timescale for action.

Taxable?

Some casual income may be covered by special rules; there are two fairly new allowances, the Property Allowance and Trading Allowance, which may be available to cover small amounts received. Each provides up to £1,000 per annum tax-free, and someone with both types of income can use both the allowances.

Where annual gross property/trading income is £1,000 or less, there is no need to tell HMRC, or declare the income on a tax return: though depending on other income, there may still be a need for tax return. And where someone has trading income, there are also circumstances when they may need to register for self-assessment and complete a return. 

Again, depending on the circumstances, it may be that these allowances do not provide the most tax efficient means of dealing with income and expenses. 

Do please contact us if you need further information here, or on any similar issue.