From April 2017 there were 2 new annual tax allowances for individuals of £1,000 each, one for trading and one for property income. The trading allowance will also apply to certain miscellaneous income from providing assets or services. 

Where the allowances cover all of an individual’s relevant income (before expenses) then they will no longer have to declare or pay tax on this income. Those with higher amounts of income will have the choice, when calculating their taxable profits, of deducting the allowance from their receipts, instead of deducting the actual allowable expenses. The trading allowance will also apply for Class 4 National Insurance contribution purposes.

This tax-free allowance was launched to cover  the new generation of landlords who rent out rooms on Airbnb, or weekend traders who make small amounts selling goods on eBay.

  1. Property income would come about from any income that you make from renting out a residence, home, building, property or land – so you could rent out your driveway as a parking space. You can rent out your home to tourists, which is the Airbnb bit. Or you can rent out your garden space.
  2. Trading income covers any sale of goods or services. You could do tasks such as cleaning or odd jobs, hiring out your own equipment such as power tools, or selling goods through a website like eBay.

The government claims 700,000 people will benefit from the new tax break, a figure based on self-assessment data from HMRC.

This allowance also inadvertently sends a message that if you have been earning more than £1,000 from these sorts of activities, but it hadn’t occurred to you that you might be taxable on it that maybe you ought to think about declaring it.

The new allowances will not apply to partnership income from carrying on a trade, profession or property business in partnership. The allowances will not apply in addition to relief given under the Rent-a-Room Relief legislation.

 

If you would like to find out more about how it might impact you then get in touch with LeeP Accountants on 01733 699033 or email Polly@leepfinancial.co.uk