Income from car boot sales
Q: I had pitches at a couple of car boot sales earlier this year to get rid of unwanted children's clothes, toys and various other items. I am a self-employed hairdresser and have to complete a tax return - will I also be taxed on the £225 I took at the car boot sales?
A: Your income you receive from hairdressing is taxed because you are running a trading business with a view to making a profit. Selling goods at car boot sales is potentially also trading income, however each case must be considered on its own merits.
For somebody like yourself who has only sold their own unwanted second hand goods on a couple of occasions, HM Revenue & Customs would not deem there to be a trading activity and therefore the income received would not need to be declared on a self assessment tax return. Likewise, because the income is not declared, relief for any associated expenses incurred (such as pitch fees and petrol/motor costs) cannot be claimed.
On the other hand if somebody regularly attends car boot sales (for instance every fortnight) with a view to making profits, HM Revenue & Customs will deem them t be trading and they would need to be registered as self-employed for tax and National Insurance purposes.
Paying tax after retirement
Q: I recently retired as a school teacher, but as I still enjoy working as a self-employed music tutor, I have opted not to receive my state pension for now. My first Teachers' Pension payment was paid last month, but they deducted tax from it - is this right? I didn't think I would need to pay tax once I was 65 years old.
A: Your Teachers Pension will be taxed in the same way your salary used to be taxed - a PAYE coding notice will be issued annually showing you how much personal allowance is being allocated against your pension income. The main difference when you reach retirement age is that you are no longer required to pay National Insurance Contributions.
Now that you have reached your 65th birthday, your annual personal allowance may increase. The maximum personal allowance available for somebody aged between 65 and 74 is currently £9,490 - this allowance is pro-rated where income exceeds £22,900, down to a minimum of £6,475. There is also a higher allowance available for individuals aged 75 and over, currently at a maximum amount of £9,640.
With regard to your self-employment, your Class II National Insurance Contributions should have ceased on the week of your 65th birthday. Class IV Contributions, which are based on assessable profits for the year are still charged in full for the tax year of your 65th birthday, but not charged for subsequent years.
Staff Christmas Party
Q: I would like to book tickets for a staff Christmas party at a local wine bar, to reward my employees for their hard work over the last year. It would be nice if we could invite partners to make it a special evening, but will this then be a taxable benefit in kind?
A: The cost incurred on holding staff parties/social events can be provided as a tax-free benefit, providing certain requirements are met.
The events must be open to all staff to attend and there is an annual limit of £150 per head (including VAT)per attendee that can be treated as a tax-free amount. If the total cost per person for all functions during any tax year exceeds £150, the exemption can be claimed against one or more functions for which the total cost does not exceed £150. The exemption cannot be deducted against the cost of any event where the amount per head has exceeded that annual limit. Expenditure for any event not covered by the exemption would be a benefit in kind and need to be reported on the end of year form P11D accordingly.
Expenditure for staff entertaining is allowable as a deduction in your accounts on the basis that it is incurred for the benefit of your employees. For VAT, input tax an be recovered on the proportion of entertaining expenses relating to employees only and not on any such expenditure relating to other guests.
Lloyd Stubbs specialises in managing tax and accountancy affairs for small business owners and can be contacted by phone or email
Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.