Charities small trading tax exemption to increase

19th November 2018

During the Autumn Budget on 29th October 2019, it was announced that the small trading tax exemption limits for Charities is set to increase.

 

The exemptions apply to Charities who trade outside of their primary purpose. A Charity will not pay tax on trading profits that are a part of the Charity’s primary purpose or helps the Charity’s primary purpose.

 

HMRC example:

Trading as part of primary purpose – selling tickets for a theatrical production staged by a theatre

Trading not relating to primary purpose – selling Christmas cards to raise additional funds

 

Should the trading fall outside of the Charity’s primary purpose, it may still be exempt from tax under the exemption limits, on the basis that it is ‘small trading’, with the changes shown below:

 

Charity’s gross income Turnover exemption limit (current)
Under £20,000 £5,000
£20,001 to £200,000 25% of annual turnover
Over £200,000 £50,000

 

Charity’s gross income Turnover exemption limit (from 1st April 2019)
Under £32,000 £8,000
£32,000 to £320,000 25% of annual turnover
Over £320,000 £80,000

 

Charities with taxable trading income of between £50,000 and £80,000 whose profits will now be deemed ‘small trading’ will therefore now be tax exempt.

 

It is worthwhile to note that if a Charity’s trading income is over £80,000, the full amount is taxable. The £80,000 is not a tax-free allowance.

 

Should the UK not negotiate a successful Brexit deal, there may be a Spring 2019 Budget which may change announcements from the Autumn Budget.

 

Further details can be found on HMRC’s website https://www.gov.uk/government/publications/increases-to-charities-small-trading-exemption-limits/increases-to-charities-small-trading-exemption-limits

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