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Tax-free property and trading income allowance information

Tax-free property and trading income allowance information

Robert Macdonald

You can claim up to £1,000 each tax year in tax-free allowances for property or trading income. If you have both types of income, you will qualify for a £1,000 allowance for each.

If your annual gross property income is £1,000 or less, from one or more property businesses, you will not have to tell HMRC or declare this income on a tax return. 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. You may still be required to complete a tax return for other income.

Likewise, if your annual gross trading income is £1,000 or less, from one or more trades you may not have to tell HMRC. Trading income includes self-employment and casual services such as babysitting, gardening, etc.

Gross income means the total amount you would put on your tax return before any allowances or expenses are taken off.

If claiming the property and trading allowances, HMRC still expect you keep proper records of your income and expenditure.

If your annual gross trading or property income, from one or more trades or businesses is more than £1,000 you can use the tax-free allowances instead of deducting any expenses or other allowances.

This would be useful if your actual expenses were lower than the £1,000 allowances. However, you cannot use the allowances to create a trading loss. You can deduct up to £1,000, but not more than the amount of your income. This is known as ‘partial relief’.

If your expenses are more than your income it would be beneficial to claim expenses instead of the allowances.

You will not be able to use the allowances in a tax year, if you have any trade or property income from: 
  • A company you or someone connected to you owns or controls,
  • A partnership where you or someone connected to you are partners,
  • Your employer or the employer of your spouse or civil partner.
You also cannot use the property allowance if you:
  • Claim the tax reducer for finance costs such as mortgage interest for a residential property,
  • Deduct expenses from income from letting a room in your own home instead of using the Rent a Room Scheme.
For more information or assistance please contact our expert tax team here.