How to benefit from the new trading and property allowances

Simplicity and certainty

On the 6th April 2017, two separate £1,000 exemptions from tax were introduced for individuals with small levels of property and/or trading income.  The aim of the new allowances are to provide simplicity and certainty regarding a person’s tax obligations for receiving small amounts of income from providing goods, services, property or other assets.

If an individual has income from trading and/or property of less than the allowances (so potentially up to £2,000), the income will be completely exempt from tax and does not even need reporting to HMRC. If income exceeds the allowance, the individual has a choice whether to claim the £1,000 allowance as a deduction against their income when calculating their taxable profit, or whether to deduct the actual expenditure incurred.

Property allowance

Examples of property income which the allowance was designed to benefit include.

  • The receipt of small amounts of grazing income or ‘grass keep’
  • The rental of a driveway, e.g. for parking during a football match
  • The occasional letting of your home on websites such as Airbnb
  • The seasonal letting of a holiday home

There are, however, a couple of situations where the allowance will not be available. The first is income received under the rent-a-room scheme (i.e. letting a room in your own home whilst you live there), and the other is where there is a mortgage on the property with loan interest being incurred.

Trading allowance

Examples of trading & miscellaneous income which the allowance was designed to benefit include.

  • Selling items on eBay
  • Sales of homemade craft items or cakes
  • Receiving income for seasonal exam paper marking or article writing
  • Providing services to supplement income such as hair dressing or window cleaning

 

As with the property allowance there are situations where the trading allowance won’t be available. Income received as part of a partnership trade is excluded, as too is any income received from the employer of the individual, or anyone connected to the individual.

Please contact us if you would like advice on any matters raised here

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