Trading allowance: packing for employers and family shops

A familiar shop asks whether you can hold a box of products and prepare its orders at home. That can sound easier than finding a new client. Before treating the first fees as tax-free, check who the shop actually is. A brand name, a family connection and a bank account do not necessarily describe the same legal relationship.

This article deals with the source-of-income exclusions, using HMRC’s manuals checked on 12 October 2026. It adds detail to the general UK trading allowance guide. It does not decide employment status or calculate the tax bill on your household’s other income.

Does having a PAYE job prevent you using the allowance? #

HMRC’s employer exclusion concerns a relevant payment made by, or on behalf of, a person while you are employed by that person, or are the spouse or civil partner of their employee. The manual explicitly distinguishes employment income. Receiving wages from your job is not the same event as receiving separate trading fees from that employer.

For a packing arrangement, draw two lines: employment wages and separately charged packing services. Write the legal payer beside each. If the same employer appears on both lines, pause the allowance calculation and check the service payment. If the packing client is unrelated, your PAYE job alone does not settle the other exclusions; you still need the rest of the map.

Do not rename wages as packing fees to fit an allowance. The agreement should reflect what you actually do and how the relationship works. A separate invoice or a platform account provides evidence of a transaction, but does not establish its tax classification. Resolve an uncertain employment arrangement before selecting a tax relief intended for relevant trading income.

Which relationship should you check for each shop? #

Ask for the legal business name used on the agreement and invoice. Keep it beside the shop’s public trading name. Add whether the business is a sole trader, company or partnership, and what makes you connected if you think a connection exists. An answer such as “my sister runs it” is a useful starting point, but leaves the legal-form question unanswered.

The map is a private working record. You do not need to exchange tax returns with a shop to ask who is contracting with you. Keep the necessary business identity and your own relationship evidence. Where ownership or control is unclear, ask HMRC or a qualified adviser about the precise facts rather than collecting unrelated personal information.

Why can a small excluded fee affect unrelated clients? #

BIM86030 states that an individual with income falling within an exclusion cannot use the allowance on any trading or miscellaneous income sources for that tax year. This is wider than removing the excluded client’s fee from the allowance calculation. Check the whole year, rather than setting aside one receipt and applying the relief to everything left.

HMRC’s BIM86074 example illustrates the point through a consultant who receives a fee from her own partnership as well as another customer. The excluded source prevents relief on the relevant income as a whole. You do not need to copy the example’s profession to use its lesson: look for an excluded source before doing arithmetic with the allowance.

For your own worksheet, create one row per client and a final column headed exclusion resolved. A large unrelated client and a very small connected client should both remain visible. Sort by date rather than size if that helps you notice changes in employment or ownership. The smallest receipt can require the most explanation.

Can an AirPost payout change who the payment came from? #

A hypothetical 20-parcel batch at AirPost’s small-parcel reference fee of €2.25 creates €45.00 of reference fees. After the payout deduction of €1.35, the corresponding amount is €43.65. Constants checked on 12 October 2026; these euro amounts are a calculation aid, not an agreed UK price or a sterling threshold test.

Neither the batch size nor the smaller payout answers the connection question. Retain the shop agreement, the fee record and the payout record so you can trace the service to the customer. HMRC’s wording includes payments made on behalf of a person. A different name on the bank deposit is therefore not enough to establish an unrelated source.

The earn from home page describes the packing service and shop-supplied stock. Use that to understand the work, then document your particular arrangement. If one withdrawal contains fees from several shops, keep the client breakdown. Combining fees into a single withdrawal does not remove their individual origins.

Is every family business automatically excluded? #

The legal test depends on the business form. For close companies, BIM86038 uses the terms participator and associate of a participator, with definitions in company tax law. Do not substitute “I do not manage the company” for those definitions. Management, ownership and the relevant association are different questions.

For partnerships, BIM86032 identifies connections including a spouse or civil partner, siblings, ancestors and lineal descendants, with additional specified family relationships. A payment from a partnership connected in this way needs review even if you are not personally a partner. The partnership test is not simply a question of whose name appears on the front of the shop.

Avoid extending these examples into an unsupported rule that any acquaintance or any relative makes every business excluded. Start with legal form, identify the particular exclusion and apply its defined relationship. If the facts do not match an example, preserve them and ask about them. Guessing broadly can be as misleading as ignoring the connection entirely.

What records help when your relationship changes during the year? #

Use a dated timeline: employment starts and ends, changes in partnership involvement, relevant ownership information, and service-payment dates. The employer manual refers to the relationship at the time of payment. A vague note that someone was “a former employer” does not show whether a particular receipt arrived while the employment still existed.

If the work was performed at one time and paid later, record both dates. Do not infer the answer from a label such as freelance or former employee. You need the actual arrangement and the rule that applies to it. For a change around the tax-year boundary, retain evidence from both sides of the boundary so the relevant year can be checked.

Once eligibility is resolved, calculate income under the appropriate method. Losing the allowance does not turn shop-owned stock into your business expense, nor does it make the gross fee equal to the bank deposit. The allowance and actual-expenses comparison explains the separate cost calculation.