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Tax-free allowances on property and trading income

From: HM Revenue & Customs

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7 April 2017

Find out about the annual tax-free allowances for property or trading income.

Contents

  1. Overview
  2. Property allowance
  3. Trading allowance

Overview

You can get up to £1,000 a year tax-free allowances for property or trading income from 6 April 2017. If you have both types of income, you’ll get a £1,000 allowance for each.

If your gross trading or property income is below £1,000 and you’re not registered for Self Assessment, you won’t have to declare this income on a tax return. You must keep a record of this income.

Gross income means the total amount you get, before any allowances or expenses.

You can choose to register for Self Assessment if you’ve made a loss and want to claim relief on a tax return.

If you’re already registered for Self Assessment, you can claim the allowances by deducting them from your gross property or trading income on your tax return. You can’t deduct expenses if you can claim the allowance.

You won’t get the allowance if income is from employment, a partnership or company you own.

Property allowance

The property allowance is a tax exemption of up to £1,000 a year for individuals with income from property.

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.

If your gross property income is less than £1,000 a year, you won’t need to tell HM Revenue and Customs (HMRC). If it’s higher, you’ll need to declare your property income.

You can’t claim the allowance on income from letting your own home under the Rent a Room Scheme.

Trading allowance

The trading allowance is a tax exemption of up to £1,000 a year for individuals with income from:

  • self employment
  • casual services, for example babysitting, gardening
  • hiring personal equipment, for example power tools

If your gross income from these is less than £1,000 a year, you won’t need to tell HMRC.

You must tell HMRC if you have:

  • self-employment income over £1,000 – register for Self Assessment
  • other income between £1,000 and £2,500 – contact HMRC
  • other income over £2,500 – register for Self Assessment

If you’re newly self-employed

If you’re starting a new self-employed business and expect your gross income will not be more than £1,000, you don’t have to register for Self Assessment.

You can still voluntarily register to pay Class 2 National Insurance.

If your gross income for the first tax year is more than £1,000, you must register for Self Assessment by 5 October in the business’s second tax year.

You can register if you make a loss and want to claim relief by filing a Self Assessment tax return.