Tax-free allowances up to £1,000 were introduced from 6 April 2017 for individuals whose gross trading or property income (i.e. the total amount before any allowances or deductions) is £1,000 or less. Where they have both types of income, the £1,000 allowance is available for each. 

‘Tax-free allowances on property and trading income’ explains that individuals who are not registered for self-assessment don’t have to declare the income on a tax return, although they must keep a record of it.

Where they have already registered for self-assessment, they can claim the allowances by deducting them from the gross property or trading income.

Issues relating to property income include

  • each of the joint owners of a property is eligible for the £1,000 allowance
  • the allowance can’t be claimed on income generated by individuals letting their own homes under the Rent a Room scheme

The trading allowance is available on up to £1,000 pa income from

  • self employment
  • casual services eg. babysitting, gardening
  • hiring personal equipment eg. power tools

Anyone starting a self-employed business where the income is expected to be less than £1,000 pa doesn’t have to register for self-assessment, although they can voluntarily pay Class 2 NICs.