Key takeaways
- The trading allowance gives you up to £1,000 of tax-free income each year from self-employment, casual work, or hiring out your personal equipment to others.
- The property income allowance provides a separate £1,000 annual tax-free threshold for income you earn from land or property, including rental payments from tenants.
- You must choose between using the flat £1,000 allowance as a simple deduction or claiming your actual recorded business expenses, because HMRC does not permit both methods.
- You cannot claim either allowance if your trading or property income comes from a connected business, a partnership you belong to, or arrangements with your employer.
- The property allowance cannot be used alongside mortgage interest tax reducer claims or deductions that are already covered under the Rent a Room relief scheme.
"According to HMRC, you can claim trading allowance if you have trading income from:
- Self-employment
- Casual services
- Hiring personal equipment
You can claim the property allowance if you have income from land or property.
You won’t be able to claim the allowances if you have trade or property income from:
- A business that you or an individual connected to you owns or controls - A partnership where you or individuals connected to you are partners - Your employer, or your spouse’s or civil partner’s employer
You can’t claim the property allowance if claim:
- Claim the tax reducer for finance costs such as mortgage interest for a residential property - Deduct expenses from income from letting a room in your own home, instead of using the Rent a Room Scheme"