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Property and Trade Allowances

Learn all about Property and Trade Allowances

Trade allowances and property income allowances help UK individuals earn a certain amount of income from trading or renting property each year without paying tax on it. These tax-free allowances are designed to simplify tax for small businesses, hobby traders, and landlords with modest income.

This guide explains how trade allowances work, what the property allowance covers, who can claim, and how to make sure you report your income correctly to HMRC.

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What Are Trade Allowances?

Trade allowances let individuals in the UK earn up to £1,000 each tax year from casual trading, side businesses, or self-employment without paying tax on that income. This is known as the trading allowance.

If your gross trading income is £1,000 or less, you don’t need to report it to HMRC (unless you’re already registered for Self-Assessment for other reasons). If you earn more than £1,000, you can still use the allowance to deduct £1,000 from your gross income instead of claiming actual business expenses.

The trading allowance is useful for people with side hustles, hobby businesses, or small amounts of freelance income. It helps keep tax reporting simple for low-level trading activity.

What Is the Property Allowance?

The property allowance lets individuals in the UK earn up to £1,000 each tax year in property income without paying tax on it. This is designed for people who make a small amount of money from letting out a driveway, renting a room (outside of Rent a Room Relief), or occasional short-term holiday lets.

If your gross property income is £1,000 or less, you don’t usually need to report it to HMRC. If you earn more than £1,000, you can either:

  • Deduct the £1,000 allowance from your rental income instead of claiming actual expenses, or
  • Claim actual allowable expenses if they’re higher than £1,000.

The property allowance keeps things simple for people with small amounts of rental or casual letting income helping you stay within the rules while avoiding unnecessary paperwork.

Getting Started with Trade and Property Allowances

Before you claim the trade or property allowance, it’s important to understand how they work and whether they apply to you. Both allowances let you earn up to £1,000 each per tax year tax-free one for trading income and one for property income.

If your income from trading or property is £1,000 or less, you usually don’t need to tell HMRC (unless you’re already in Self-Assessment for other income). If you earn more than £1,000, you can choose to use the allowance to reduce your taxable income instead of claiming actual expenses whichever is better for you.

Knowing how to use these allowances can help side businesses, hobby traders, and landlords keep tax simple and stay compliant with HMRC rules.

Property allowance

A property allowance is available to individuals.

The property allowance will not apply to partnership income or to income on which rent a room relief is given.

Income up to £1,000: Property income assessable NIL

Income over £1,000: Election to deduct £1,000 rather than the actual expenses

Trade allowance

A trade allowance is available to individuals.

There is an equivalent rule for certain miscellaneous income. This will apply to the extent that the £1,000 trading allowance is not used against trading income.

The trade allowance is not available against partnership income.

Income up to £1,000: Profits assessable NIL

Income over £1,000: Election to deduct £1,000 allowance rather than the actual expenses

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Who Can Use Trade and Property Allowances?

Most individuals in the UK can use the trade allowance and property allowance if they have small amounts of income from casual trading or property letting. These allowances are designed to help people with side hustles, hobby sales, or modest rental income.

Trade Allowance:

You can use the trading allowance if you earn money from selling goods online, doing freelance work, offering services, or running a small side business. It’s available to self-employed individuals, but not to partnerships.

Property Allowance:

You can use the property allowance if you receive income from letting out land or property for example, renting out your driveway, garage, garden space, or a holiday let (but not if you claim Rent a Room Relief for the same income).

Who Can’t Use These Allowances:

  • You can’t claim the trade or property allowance on income from a partnership or if you receive property income through a company.
  • If you claim expenses instead, you can’t also claim the £1,000 allowance for the same income.
  • If you have joint property income, each owner can claim their own £1,000 allowance on their share.

Understanding who qualifies helps you decide whether to claim the allowance or deduct actual expenses whichever saves you more tax.

How to Claim Trade and Property Allowances

Claiming the trade allowance or property allowance is straightforward, but you need to know the rules and when to include it in your tax return.

If Your Income Is £1,000 or Less:
If your total gross trading or property income is £1,000 or less for the tax year, you don’t normally need to tell HMRC or file a tax return unless you already need to complete a Self-Assessment for other reasons.

If Your Income Is Over £1,000:

If your income is over the £1,000 threshold, you’ll need to:

  • Register for Self-Assessment if you’re not already registered.
  • Report your total income and choose to either:
    Deduct the £1,000 allowance from your gross income or
    • Deduct your actual allowable business or property expenses whichever gives you the bigger tax saving.

How to Report:

You claim the allowance through your Self-Assessment tax return. There’s a specific section to show that you’re using the allowance instead of claiming actual expenses.

Keep Good Records:

Always keep clear records of your income and any expenses even if you use the allowance so you can show HMRC how you calculated your figures if asked.

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Trade and Property Allowances FAQ’s

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A trade allowance is a £1,000 tax-free amount you can claim each tax year on trading income from casual or self-employed work.

Individuals with small amounts of trading income like side hustles, hobby sales, or occasional freelance work can claim the trade allowance. It can’t be claimed on partnership income.

The property allowance is a separate £1,000 tax-free amount for small amounts of property income, like letting a driveway, garden, or holiday let (not covered by Rent a Room Relief).

Yes you can claim both allowances in the same tax year if you have qualifying trading income and separate qualifying property income.

If your total gross trading or property income is £1,000 or less, you usually don’t need to tell HMRC unless you’re already in Self Assessment for other income.

No if you claim the £1,000 trade allowance, you can’t also claim actual expenses for the same income. You must choose whichever is better for you.

If your income is above £1,000, you claim the trade allowance through your Self Assessment tax return by deducting it from your gross income instead of claiming expenses.

You claim through your Company Tax Return (CT600) if you’re a company, or your Self Assessment if you’re self-employed or in a partnership. Keep accurate records and calculations.

No the trade allowance can’t be used for income from a partnership or income received through a company.

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