Trading allowance and Property allowance

From 6 April 2017 HM Revenue and Customs introduced two annual allowances of £1,000 that can be used against property or trading income.

These allowances have very limited restrictions, and the taxpayer can choose to use these instead of offsetting expenses. This is tax efficient where the actual expenses incurred are minimal or none. Where a taxpayer has both a trade income and property income, allowances can be utilized totalling £2,000 of expenses to reduce the taxable profits.

Trading allowance

The Trading allowance can be used against self-employment, miscellaneous or casual income. A maximum of £1,000 can be claimed across multiple trades within the tax year.

The taxpayer is able to use the trading allowance in the most tax efficient way by considering any brought forward trading losses. The way in which the allowance is used can be changed each year to suit the taxpayer as well.

Property Allowance

The property allowance allows a £1,000 deduction against rental earnings each year.

If a property is jointly owned, each owner is entitled to a £1,000 deduction on their share of rental income which can be a great tax saver.

In both trading and property allowances, it is not possible to use the allowance to create a loss position.

It is also not possible to claim expenses whilst also claiming an allowance.

While this is a great tax saver for many, there are a few exemptions HMRC has imposed on the eligibility which means, as always, it is better to discuss this with your tax adviser before making a claim for these allowances. For more information see HMRC or contact your local Perrys branch.