Queries about being Self-Employed and Trading Allowance

[foolishalec]

Hi. Hypothetical scenario:

My total annual income consists of £9k pension, topped-up by income of £1.5k buying/selling on eBay. The total is £10.5k which is less than my annual personal allowance (£12.57k).

a) Do I need to register as self-employed?

b) I have read that income made on eBay is taxable but there is a Trading Allowance of £1k. Does this mean:
i) I pay no tax?
ii) I pay no tax on the £9k pension but pay (20%?) tax on (£1.5k - £1k = ) £0.5k?
iii) Something else?

Many thanks for any explanations.

[gryffron]

The £1k is not an allowance.
The £1k TURNOVER limit is a threshold below which you can claim it is a "hobby" and thus tax exempt.
Exceed that TURNOVER figure and ALL the NET income (i.e. gross less expenses) is self employed income.
https://www.gosimpletax.com/blog/when-h ... 20deducted.

So:

a) Yes, in the example you give you will need to register as self employed. And submit self assessment.

b) Your total income is < income tax threshold so you will pay no tax.

You might want to choose to pay voluntary Class 2 NI. If you need any additional years of NI contributions for your state Pension it's the cheapest possible way to buy them. Best investment you will ever make - IF you need extra years. Pointless if you don't.

Gryff

[foolishalec]

Many thanks Gryff. Very helpful.

[chris]

Hi Gryffron.
Not quite correct. The £1000 is deemed expenses, so if you earn £1000 or less, you can use the deemed expenses of £1000 to negate any taxable income. Therefore, you do not have to declare it on your tax return. If you have taxable income of £1500 but costs of only £750, you can still use the deemed expenses of £1000 to claim a taxable profit of £500 instead of £750. You cannot claim both of course, so if expenses are more than £1000, you claim actual expenses.