How many people know that they can claim an extra £2000 tax free income?

Smaller businesses like a start up network marketing business can claim up to £1000 without having to prove their expenses. What’s more you won’t need to complete a tax return if your income is less than £1000. You can also claim the allowance if you have a small amount of property income.

But the best news is you can claim up to an extra £2000 tax free in one year if you have both!

The only downside to these allowances are that they may not be relevant for many people. But here’s the thing, some small businesses generate income and have little in the way of expenses. So if the expenses are less than £1000, claim the allowance instead.

Let’s take a look at an example – this might be a part time hairdresser:

 

  Without the Allowance With the Allowance 
Business income 2400 2400
Business expenses total  600 –
Trading Allowance – 1000
Taxable Profit 1800 1400

or maybe someone getting income from a network marketing business…

  Without the Allowance With the Allowance 
Business income 875 875
Business expenses total  – –
Trading Allowance – 875
Taxable Profit 875 0

So you can see that it makes a difference. In the first example, to how much profit you will pay tax on. In the second, without the allowance you are paying tax on £875 and completing a tax return. But with the allowance, no tax to pay and no tax return to complete. So that’s how to make an extra £2000 tax free income!