Many businesses commence trading with just a few occasional sales, and only after the individual has convinced themselves they can effectively deliver the product or service will they enthusiastically launch their business. At that stage you may well seek out our professional help.
The difficulty here is deciding when the new business actually commenced. Is it when the first sale was made, or was it much later when a viable business seemed possible? The trading and miscellaneous income (TMIA) allowance can help us out here.
The TMIA came into effect on 6 April 2017, and covers up to £1,000 of trading or other sundry income per tax year. It doesn’t matter when the sales were made within the tax year, if the total is less than £1,000 the TMIA will cover them, and the allowance doesn’t have to be claimed on the tax return. See examples in HMRC’s Business Income Manual at BIM86070.
Sally quit her job to launch her new business in July 2018, having made a few test sales in January to March 2018 which amounted to £700. The 2017/18 sales can be covered by the TMIA of £1,000, so the real business can be said to start in July 2018 within 2018/19. Sally is still within time to register as self-employed for 2018/19 without incurring a penalty, and she won’t have to complete a SA return for 2017/18 as her taxable income was fully reported under PAYE for that year.
Written by the Tax Advice Network