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Trading and Property Allowances

These two allowances of £1,000 each are available to all individuals (regardless of your level of other income), for tax years starting 6 April 2017. These allowances are per person, so you can get one Trading Allowance up to £1,000 and one Property Allowance up to £1,000 (subject to conditions discussed below) per tax year. They are also separate from each other, so you can claim either or both. And you can choose every year whether you want to claim the allowance(s) or not.

What is the Trading Allowance?

Trading allowance can be claimed by anyone who receives trading income from self-employment, or casual services (e.g. caring, construction workers claiming CIS, babysitting, gardening, etc.), or hiring personal equipment (e.g. power tools). You can get up to £1,000 each year as a tax exemption on your trading income received during the tax year.

If the total of all your trading income is less than £1,000 for the tax year, then you will not pay any tax on your trading income – but please note that this allowance cannot be used to create a tax loss.

If your trading income is more than £1,000 then you can choose to either claim the £1,000 trading allowance or you can claim actual expenses (latter is recommended if actual expenses are more than £1,000). Very important to note is that if you claim the trading allowance you cannot also claim other expenses (or capital allowances), like home office, mileage, etc.

Please note that you cannot use the Trading Allowance in a tax year in which you:

  • have trade income from a partnership where you or someone connected to you are partners
  • have trade income from your employer or the employer of your spouse or civil partner
  • have trade income from a company you or someone connected to you owns or controls

What is the Property Allowance?

Property allowance can be claimed by anyone who receives income from land and property. You can get up to £1,000 each year as a tax exemption on your property income received during the tax year. If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income. But please note that you cannot use the property allowance on income received from letting a room in your own home under the Rent-a-Room scheme.

If the total of all your property income is less than £1,000 for the tax year, then you will not pay any tax on your property income – but please note that this allowance cannot be used to create a tax loss.

If your property income is more than £1,000 then you can choose to either claim the £1,000 property allowance or you can claim actual expenses (latter is recommended if actual expenses are more than £1,000). Very important to note is that if you claim the property allowance you cannot also claim other expenses (or capital allowances) like insurance, management fees, etc.

Please note that you cannot use the Property Allowance in a tax year in which you:

  • deduct expenses from income from letting a room in your own home instead of using the Rent-a-Room scheme
  • receive a tax reduction for non-deductible interest on residential let property
  • have property income from a partnership where you or someone connected to you are partners (but you can use it for jointly owned property where there is not a partnership e.g. property jointly owned by you and your spouse/ civil partner)
  • have property income from your employer or the employer of your spouse or civil partner
  • have property income from a company you or someone connected to you owns or controls

This blog is for information purposes only, and is not intended to provide tax advice – for this, you should consult an accountant.

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