New Income Tax Allowances

4 Jan 2017

​Extra, Extra! Read all about the so called simplification to your income tax calculation if you are earning a bit extra on the side.
The Government continues to look at ways to bring low levels of income out of taxation. As such, two new income tax allowances of £1,000 each are to be introduced from 6 April 2017. These new allowances will apply to income (before expenses) of: • up to £1,000 from trading such as selling goods they have made; and • up to £1,000 of miscellaneous income from providing assets or services, for example renting a driveway. Where each respective allowance covers all of your relevant income, the new relief will completely exempt you from disclosing or paying tax on the income. This was originally dubbed a simplification by the Government and, for those of you generating income less than the £1,000 exemption limit; it certainly will be. However, should your income exceed £1,000, you will still need to report your income in the normal way. Additionally, you will need to make a decision on how you calculate your profit or loss for the year. You can opt to calculate your taxable profits in the normal way (i.e. income less expenses), or instead deduct the £1,000 exempt amount from your income in place of your actual expenses. The trading allowance will also apply for Class 4 National Insurance contribution purposes. However, the exemption for property cannot be claimed in addition to the existing rent-a-room scheme. So, is it a complete simplification? Maybe not for all, but hopefully a big relief for some of you. Should you want to know more about these new income tax allowances and how they may impact you, please contact us for further guidance.

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