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✅ Earnings Under £1,000: The Trading Allowance
HM Revenue & Customs (HMRC) provides a £1,000 tax-free trading allowance annually. If your total income from self-employment or side activities, including TikTok Shop, is £1,000 or less within a tax year (6 April to 5 April), you typically don’t need to inform HMRC or pay tax on this income.
⚠️ Earnings Over £1,000: Reporting Required
If your TikTok Shop income exceeds £1,000 in a tax year, you must:
- Register for Self Assessment: Do this by 5 October following the end of the tax year in which you earned the income.
- Submit a Tax Return: File your Self Assessment tax return by 31 January of the following year.
Even if your profit is minimal or you’re employed elsewhere, reporting is mandatory.
📊 Understanding Your Tax Obligations
- Income Tax: You’ll pay tax on profits exceeding the personal allowance, currently £12,570.
- National Insurance Contributions (NICs): If your profits surpass £12,570, Class 2 and Class 4 NICs may apply.
- Allowable Expenses: Deduct legitimate business expenses (e.g., equipment, marketing) to reduce taxable profit.
Accurate record-keeping is crucial for calculating these figures.
🧾 Keeping Accurate Records
Maintain detailed records of:
- Sales and Income: Track all earnings from TikTok Shop.
- Expenses: Document costs related to your business activities.
- Invoices and Receipts: Keep proof of transactions and purchases.
These records support your tax return and help in case of HMRC inquiries.
🕒 Upcoming Changes: Reporting Threshold Increase
The government plans to raise the threshold for filing Self Assessment tax returns from £1,000 to £3,000 by 2029. Until then, the £1,000 limit remains in effect.
✅ Summary
- Earnings ≤ £1,000/year: No need to report or pay tax.
- Earnings > £1,000/year: Register for Self Assessment and submit a tax return.
- Maintain accurate records: Essential for compliance and accurate tax calculations.
For personalized advice, consider consulting a tax professional or using HMRC’s Check if you need to tell HMRC about your income from online platforms tool.
