Archive: 16th July 2026

Income Tax

When does a hobby become a taxable business?

Jul 16, 2026 by Terry Harris 0 Comments

Not every hobby becomes a taxable business, but it is important to be aware when this can happen. This can apply even if you are making some money from your hobby. HMRC looks at a range of factors to decide whether an activity is a genuine trade, including whether there is a business intention behind it or whether it remains a personal interest.

A hobby can gradually develop into a business, particularly where activities become more regular, organised or profit-focused. For example, repairing cars, selling collectibles or making items to sell may generate income, but this alone does not automatically mean a person is carrying on a business. HMRC considers whether the activity passes the “business test” when deciding if tax rules apply.

Small-scale or occasional sales from hobbies will not usually be treated as a business. However, where a hobby grows into a more substantial activity, it may create tax obligations. Many successful businesses have started as hobbies.

Where income does become taxable, there are two separate £1,000 tax-free allowances that may help:

  • the trading allowance for income from self-employment, casual services or hiring out personal equipment
  • the property allowance for gross property income, such as renting out a driveway

If either relevant allowance covers all the income from that activity, the income is tax-free and does not need to be declared. If income exceeds £1,000, the allowance can sometimes be deducted instead of actual allowable expenses when calculating taxable profits.

Source: HM Revenue & Customs | 13-07-2026
Value Added Tax

Could your business recover more VAT?

Jul 16, 2026 by Terry Harris 0 Comments

If your business is VAT registered, you can usually reclaim VAT on many of the goods and services you buy for business purposes. However, many businesses fail to claim everything to which they are entitled  and may be able to recover more VAT.

You can normally reclaim VAT on business purchases through your VAT return, provided you hold valid VAT invoices. Where an item is used for both business and personal purposes, only the business proportion of the VAT can be reclaimed. For example, if you work from home or use a mobile phone for both business and personal use, you should calculate and retain evidence of the business element.

You may also be able to reclaim VAT on purchases made before registering for VAT. This generally applies to goods still owned that were purchased within the previous 4 years and services received within the previous 6 months. These purchases must relate to VAT taxable business activities that you supply.

Businesses should also review the special rules that apply to vehicles, fuel and employee travel expenses. While VAT can often be reclaimed on running costs and business travel, restrictions apply to cars used privately, entertainment expenses and items used to make VAT-exempt supplies.

If your business uses the VAT Flat Rate Scheme you cannot usually reclaim VAT on your purchases as this is covered by the scheme. However, VAT can be reclaimed on certain qualifying capital assets costing more than £2,000.

Source: HM Revenue & Customs | 13-07-2026
Capital Gains Tax

Is your spouse paying more tax than necessary?

Jul 16, 2026 by Terry Harris 0 Comments

Married couples and civil partners are taxed separately for Capital Gains Tax (CGT), meaning each person has their own annual tax position. However, with careful planning, transferring assets between spouses or civil partners can sometimes help reduce their overall tax bill.

Where spouses or civil partners are living together, most transfers of assets between them take place on a 'no gain, no loss' basis. This means there is no immediate CGT charge when the asset is transferred. Instead, the receiving spouse effectively utilises the original purchase cost and any gain is calculated based on this cost when they eventually dispose of the asset.

This can be particularly useful where one spouse pays tax at a lower rate or has unused CGT allowances. By transferring an asset before it is sold, the gain may be taxed more efficiently, potentially reducing the overall CGT liability.

Ownership is also important. If an asset is genuinely owned beneficially by one spouse, that spouse is responsible for reporting any gain. Couples should ensure that legal ownership reflects the intended beneficial ownership, particularly where jointly owned assets are involved.

Special rules also apply if a couple permanently separates. In many cases, transfers between former spouses or civil partners can still qualify for no gain, no loss treatment for up to the end of the third tax year after separation, while transfers made under a formal divorce or separation agreement or court order can continue to receive this treatment without any time limit.

Source: HM Revenue & Customs | 13-07-2026
Business

Could you claim tax relief for property repairs?

Jul 16, 2026 by Terry Harris 0 Comments

Property owners often incur costs for repairs, and understanding which costs can be deducted is important when calculating taxable property income.

You can generally claim tax relief for repairs carried out on a property business, provided the cost relates to restoring or maintaining the property rather than improving it. A deduction is normally available when the repair expense is incurred, but future repairs that are only anticipated cannot usually be claimed.

Claiming capital allowances on a property or asset does not prevent you from claiming a deduction for genuine repairs. However, costs that improve or enhance the property may be treated as capital expenditure rather than a repair.

If you receive grants or insurance payments towards repair costs, these may reduce the amount you can deduct. Similarly, where tenants contribute towards repair costs, you can generally only claim a deduction for the amount you actually pay.

Understanding the difference between repairs and improvements can help ensure you claim the correct tax relief and accurately report your property income.

Source: HM Revenue & Customs | 13-07-2026
Corporation Tax

Are you maximising tax relief on company losses?

Jul 16, 2026 by Terry Harris 0 Comments

If your company makes a trading loss, it may be able to claim relief to reduce its Corporation Tax liability. Trading losses can often be used in different ways, depending on your company’s circumstances.

A company may be able to use a trading loss against profits from the same accounting period, carry it back to reduce profits from an earlier period, or carry it forward to offset against future profits from the same trade.

When calculating a trading loss, adjustments may be needed to the company’s accounting profit or loss, including the impact of capital allowances and certain other tax adjustments. The amount of relief available will depend on the company’s individual circumstances.

If a loss is carried forward, it can usually be used against future profits. However, there are a number of restrictions that can apply to the amount of carried-forward losses that can be offset in certain circumstances.

A company may also be able to carry a trading loss back to claim a repayment of Corporation Tax previously paid. This can provide valuable cash flow support by resulting in a tax repayment.

Claiming available loss relief can help reduce the impact of a trading loss and ensure your company does not pay more Corporation Tax than necessary.

Source: HM Revenue & Customs | 13-07-2026