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July 29th 2019

£1000 tax allowance for traders and landlords - a little boost

The £1000 allowances for property and trading income came into force with effect from 2017/18 onwards. The trading income allowance also covers miscellaneous income from the provision of assets or services.

The allowances work in a similar way to rent-a-room relief, in that the taxpayer has choices based on the level of gross trading or property income in the tax year:

  • Income of £1000 or less – either the income is exempt from income tax or the taxpayer can choose to disapply the allowance and calculate the profit or loss under normal business income principles.
  • Income of more than £1000 – either the profit or loss is calculated under normal business income principles or the taxpayer can elect to deduct the £1000 allowance from his gross income and be taxed on the excess

The allowances are of most benefit to micro-entrepreneurs, such as those with secondary incomes from:

  • Letting property through sites such as Airbnb, although it is worth considering whether rent-a-room relief applies as that relief is more generous
  • Trading via e-marketplaces: however, remember that those selling their old possessions are unlikely to be trading

The allowances are set at £1000 and can only be amended by secondary legislation, meaning it is unlikely the level of the allowances will be up-rated annually. As such, the value of these allowances is likely to be eroded over time by inflation.

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