From 6 April 2017, there was a new £1,000 Trading Allowance and £1,000 Property Allowance available to use against trading income and rental income. Although the allowance is designed to be straightforward, as ever, there is always some detail in the rules that is worth considering.
The trading allowance can be used against self employment income from 6 April 2017. Here some important points to consider with the allowance;
- If your total self employment income before expenses in the year is £1,000 or less, you may not be required to submit a tax return.
- You will have the option of claiming the trading allowance or claiming expenses in the year. It may be more beneficial to claim expenses where allowable expenditure is more than £1,000.
- The trading allowance cannot be used to create a loss, whereas if you claim expenses in the year, this can create a loss, from which it might be possible to get tax relief.
The property allowance works in a similar way to the trading allowance. It can be used against rental income when renting out a property that is not your own home/residence.
You cannot use either allowance against;
You can’t 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 can’t use the property allowance if you:
- claim the tax reducer for non-deductible costs of a dwelling loan
- deduct expenses from income from letting a room in your own home instead of using the Rent a Room Scheme