Property and Trade Allowances

Overview

The trading allowance and the property income allowance let UK individuals receive a limited amount of income from trading or letting property each year without paying tax on it. They are meant to simplify tax for small businesses, hobby traders and landlords with modest income. This guide explains how each allowance works, who can claim, and how to report your income correctly to HMRC.

What Is the Trading Allowance?

Individuals can receive up to £1,000 per tax year from casual trading, side businesses or self-employment without paying tax on it. If your gross trading income is £1,000 or less, you will not usually need to register for Self-Assessment solely because of that income, although other circumstances may still require you to file a tax return. If it is above £1,000, you can still use the allowance by deducting £1,000 from gross income instead of claiming your actual business expenses. It is helpful for side hustles, hobby businesses and small amounts of freelance income, and keeps reporting simple for low-level trading.

What Is the Property Allowance?

The property allowance lets individuals receive up to £1,000 per tax year of property income tax-free. It suits people who earn a little from letting a driveway, renting a room (outside Rent a Room Relief) or occasional short-term holiday lets. If gross property income is £1,000 or less, you do not usually need to report it. If it is more, you can either deduct the £1,000 allowance from your rental income instead of claiming actual expenses, or claim your actual allowable expenses if they come to more than £1,000. This keeps things simple for small amounts of rental or casual letting income and avoids unnecessary paperwork.

Getting Started

Before claiming, check how the allowances work and whether they apply to you. You get £1,000 for trading income and a separate £1,000 for property income, each tax-free per year. If your income from trading or property is £1,000 or less, you normally do not need to tell HMRC (unless you are in Self Assessment for other income). If it is over £1,000, you can choose to use the allowance to reduce taxable income instead of claiming actual expenses, whichever works out better.

Property Allowance: The Rules

The property allowance is available to individuals. It does not apply to partnership income or to income that has Rent a Room Relief.

Trading Allowance: The Rules

The trading allowance is available to individuals. A similar rule covers certain miscellaneous income, to the extent the £1,000 allowance has not been used against trading income. It cannot be used against partnership income.

Who Can Use the Allowances?

Most UK individuals with small amounts of casual trading or letting income can use them, including people with side hustles, hobby sales or modest rental income.

Trading allowance

Suitable if you sell goods online, freelance, offer services or run a small side business. It is available to self-employed individuals but not to partnerships.

Property allowance

Suitable if you let out land or property, such as a driveway, garage, garden space or holiday let, but not where Rent a Room Relief is claimed on the same income.

Who cannot use them?

Excluded Income Base

You cannot claim the allowance on partnership income or company property items.

Expenses Versus Rule

If claiming expenses instead, you cannot also claim £1,000 on that same income.

Joint Property Rules

With joint property income, each owner can claim £1,000 allowance on their share.

How to Claim

Most UK individuals with small amounts of casual trading or letting income can use them, including people with side hustles, hobby sales or modest rental income.

Income of £1,000 or less

If total gross trading or property income for the tax year is £1,000 or less, you normally do not need to tell HMRC or file a return, unless you already complete Self Assessment for other reasons.

Income over £1,000

You will need to register for Self Assessment if not already registered, report your total income, and choose between deducting the £1,000 allowance from gross income or deducting actual allowable business or property expenses, whichever gives the bigger tax saving.