BIM86088 - Example: Individual with income fluctuating around TMIA limit

Stanley has employment income from his full time job but also runs a small advertising business in his spare time.

Depending on other commitments Stanley can spend varying amounts of time working on the business and year on year his gross income is either just below £1,000 or just above £1,000.

Stanley will have to work out his gross income every year to determine whether he needs to complete a self-assessment return. If Stanley’s gross income is:

• no more than the £1,000 allowance he will automatically qualify for full relief and will not need to complete a self-assessment return, or if

• above the £1,000 allowance he will not qualify for full relief and will need to complete a self-assessment return.

In both cases Stanley should also calculate his allowable expenses as:

• if his expenses exceeded his income he may want to utilise his losses by electing for full relief not to apply by completing a self-assessment return, or

• if his income exceeds £1,000 but his expenses are less than £1,000 he may want to elect for partial relief to apply.

Stanley will receive a notice to file each year from HMRC – if Stanley does not need to complete a self-assessment return for a particular year he can request that HMRC withdraw a notice to file as he no longer satisfies SA criteria for that year. If Stanley does not think he will have gross income of over £1,000 in the following year he can opt out of SA permanently. There may be other circumstances where Stanley qualifies for Full relief where he may be required to register for self-assessment or class 2 National insurance contributions – refer to Gov.uk page https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

If Stanley no longer qualified for full relief he would be required to notify chargeability again.