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"Trading" tax allowance and optimising what you can use it for

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Author Topic: "Trading" tax allowance and optimising what you can use it for  (Read 596 times)
Newbie
Posts: 10

I like property

« on: June 20, 2018, 02:42:45 PM »


Has anyone digested the new £1k p.a trading tax-free allowance rules:

https://www.gov.uk/government/publications/income-tax-new-tax-allowance-for-property-and-trading-income/income-tax-new-tax-allowance-for-property-and-trading-income

How do I optimise my use of it?

Lets say there are 3 people in my family, each with one property.

Can I do work (gardening, painting, showing around tenants, processing applications) for another member of my family and charge them for my time?

Can I do work for my OWN property and list it as an expense on my property, and income on my own tax return?

If this is paid work from a tenant - say cleaning, is that different from gardening that is covered in the tenant's rent?

If my wife and I shared a property, would that change whether I could pay myself for gardening etc.?

I know this is small beans, but it amounts to several hundred quid p.a.  across the family, so it feels like it is worth doing.

Global Moderator
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« Reply #1 on: June 20, 2018, 03:23:13 PM »

Um...

Haven't you misread this (or have I?)?

What it is intended to be - this is my reading of it - is a simplified way of doing your accounting if you have very small amounts of income from something other than PAYE work, and property is given as an example. I have been reading it like it's something akin to the furnished allowance that used to exist. Whereby you could just say 10% of your rental income was the number you could use in your tax assessment calculations, rather than adding up loads of varied and various stuff. Isn't this similar?

It's not about trading / horse-trading... doing work for each other... doing work for yourself. It's saying, if your income from property is very small, then it might be possible to just make use of this vehicle (it's not really a vehicle, like a moped or tram or hovercraft) to simplify your accounting, i.e. "Where the allowances cover all of an individualís relevant income (before expenses) then they will no longer have to declare or pay tax on this income." - I did note the comment about providing Services, but I am certainly not sure you can create an internal Services merry-go-round and collectively spin around until your tax liability is effectively zero. Everyone would be dizzy! I am, imagining it.

Now... all of that said... I'm not an Accountant, I'm a real person. So maybe it would be wise to take proper advice. The objective behind this initiative is to simplify things, so if we find it's just confusing us, then either we're stupid or it's failed in its objective. If you do get formal advice, please come back and enlighten all of us.
Newbie
Posts: 10

I like property

« Reply #2 on: June 20, 2018, 04:18:14 PM »


There are 2 new allowances.

First £1k of property income

First £1k of other income - not necessarily relevant to property at all - babysitting, gardening, ironing, ebaying etc.

I'm not seeking to create some daft accountancy circle, just discover if I can pay my brother £300 p.a for gardening and he pay me £200 for painting our respective properties. Or my mum pay me £50 to hold some viewings or do some cleaning.

I believe that these would be legit expenses for the landlord to claim for were it a professional handyman-gardener doing the work, so why not a relative?

If I were to provide these services to a stranger, I could use this £1k allowance and not be taxed on it.

I suspect billing yourself for work is going to be excluded (although it might not be?) what about doing work on a property owned by a spouse? what about billing for work done on a shared property?

I'm not trying to pull a fast one, just legitimately optimise tax liabilities.
Global Moderator
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« Reply #3 on: June 21, 2018, 09:00:21 AM »

Can the two allowances be separated like you think? I mean, if you're paid for doing viewings, it's still property. I don't know the answer. I do know the amounts are so small as to be something that it's very unlikely for HMRC to look into in any great detail. It's like the office use allowance - you just claim it, you don't need to spend your time saying you used your printer 22% of the time for your property-related stuff and bought 2 black cartridges in that tax year... you just claim the £104 or £2 per week, or whatever it is (I think it's that). I am not an Accountant, though... please get some proper advice and then share it back with us - I'm sure we can benefit from it.
Global Moderator
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« Reply #4 on: June 21, 2018, 09:07:57 AM »

I'm not trying to pull a fast one, just legitimately optimise tax liabilities.

I wasn't implying you were... I was more making a comment on the fact that a policy that was supposed to simplify things had caused confusion (probably through it being new)... there are often HMRC helper documents. What I still don't truly get is how these "casual services" negotiated between family members are valued realistically. I am meaning... your wife does 1 viewing for you, lasting 30 minutes, and she charges you the full £1,000... is that OK for her to claim that £1,000 allowance for Trading (I speak a little facetiously there, of course it is not - but what is - £10 per hour, £25 per hour, the rate you normally get paid in real work?)? And it is quite clear you must maintain a set of invoices.

If you receive more than £1,000 per year in Property, which any Landlord would / should, then my understanding is that this is out for claiming? Do you agree?
Newbie
Posts: 10

I like property

« Reply #5 on: June 21, 2018, 02:58:20 PM »


I agree that the "property income" allowance is nothing to think about - you will or will not get it, presumably based on the info in your tax return.

I believe the "Trading" allowance will be separate and me doing odd-jobs for a relative/neighbour is nothing to do with my property income even if it is connected with theirs.

If you are already a sole trader (e.g plumber) this allowance gets you nothing, but on top of a PAYE it allows a small amount of extra tax free income.

What I don't understand, is what restrictions there are on this income. Looks like you cant have it from a spouse or business partner etc. but how far does this extend.

I'm hoping someone understands this and will give us both the bottom line!
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« Reply #6 on: June 21, 2018, 05:59:22 PM »

The intent of the legislation is to set a de minimis level below which people don't have to declare income if they're just flogging the odd crocheted bobble hat on Etsy, doing a bit of buying and selling on Ebay or doing a couple of weeks on AirBnB. I dare say in a lot of cases people wouldn't have bothered declaring it anyway but this at least levels the playing-field for those who are too conscientious (or scared of getting caught!)

Clearly, what you're suggesting is gaming the system but I don't think there's much HMRC would or could do about it, even if they spotted it, in the short term. It joust boils down to whether you think it's ethical.
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