Published On: Sun, Aug 16th, 2020

Property income allowance: What is property income allowance? | Personal Finance | Finance

Tax-free income allowances for property or trading could get you up to £1,000 a year.

For example, if your annual gross trading income is £1,000 or less, from one or more trades you may not have to tell HMRC.

However, there are circumstances when you must register for Self Assessment and declare your income on a tax return.

If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return – this is the Property Income Allowance. explains the rules of the Property Income Allowance.

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What is Property Income Allowance?

The Property Income Allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property.

You can use this allowance to pay less tax on your rental income.

If what you earn from renting out a property is less than £1,000 a year, you don’t even need to declare this income.

You won’t need to tell HMRC unless you can’t use the allowances.

It can also be used if your rental expenses are under £1,000.

You can’t use the allowance in a tax year if you have had any 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 also can’t use the 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

There are a number of records you must keep if you do use the allowance, for example, you may need to keep:

• Copies of your invoices, paper or electronic
• A spreadsheet of your income receipts
• Emails confirming income received
• Statements from the company who paid you which show the amount you received
• Bank statements
• Bank deposit pay-in records
• A diary or appointments book showing your income from each customer

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