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Small Trading Tax Exemption For Charities
The small trading tax treatment of charities can be complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to benefit from any beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.
A charity will not pay tax on profits it makes from trade if:
- they are making money to help their charity’s aims and objectives, known as ‘primary purpose trading’
- their level of trade that is not primary purpose falls below the charity’s small trading tax exemption limit
- they trade through a subsidiary trading company
The charity must pay tax on any other profits.
The small trading tax exemption limits are as follows:
| Charity’s gross annual income | Maximum permitted small trading turnover |
| Under £32,000 | £8,000 |
| £32,001 to £320,000 | 25% of your charity’s total annual turnover |
| Over £320,000 | £80,000 |
If the charity’s small trading turnover is higher than the exemption limits, then they are required to pay tax on all of their profits from that trade.
The tax treatment of charities can be complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to benefit from any beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.