A new £1,000 allowance for property and trading income came into effect during 2017/18. The allowances are of most benefit to micro-entrepreneurs, such as those with secondary incomes who, for example, let property through sites such as Airbnb and trading via e-marketplaces.
The allowance can be claimed against property/trading income OR the taxpayer may deduct expenses incurred ‘wholly and exclusively’ for the purposes of the trading/property businesses. Care is needed as the deduction of the allowance cannot create a loss. Restrictions also apply to ensure no-one benefits from both rent-a-room relief and this new allowance.
Finally, as these allowances act independently of each other, it is possible to receive £1,000 of trading income and £1,000 of gross property receipts to create a situation where the entire £2,000 would be exempt from Income Tax.
If you are interested in how property and trading allowances can be taken advantage of please do contact us.