Trading and Property Allowances

From 6 April 2017, there was a new £1,000 Trading Allowance and £1,000 Property Allowance available to use against trading income and rental income. Although the allowance is designed to be straightforward, as ever, there is always some detail in the rules that is worth considering.

Trading Allowance

The trading allowance can be used against self employment income from 6 April 2017. Here some important points to consider with the allowance;

  • If your total self employment income before expenses in the year is £1,000 or less, you may not be required to submit a tax return.
  • You will have the option of claiming the trading allowance or claiming expenses in the year. It may be more beneficial to claim expenses where allowable expenditure is more than £1,000.
  • The trading allowance cannot be used to create a loss, whereas if you claim expenses in the year, this can create a loss, from which it might be possible to get tax relief.

Property Allowance

The property allowance works in a similar way to the trading allowance. It can be used against rental income when renting out a property that is not your own home/residence.

You cannot use either allowance against;

You can’t use the allowances in a tax year if you have any trade or 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 can’t use the property allowance if you:

 

SA302 Forms & Applying For a Mortgage

If you want to apply for a mortgage and you have income in the form of dividends, or you are self-employed, for many years mortgage lenders have requested copies of SA302 forms. These forms were provided by HMRC showing a breakdown of income and the tax paid in each tax year.

HMRC has stopped providing these forms from 5 September 2017. HMRC has said for some time that many mortgage providers should be accepting tax overviews* but we have often continued to request SA302 forms, as we know that some mortgage lenders will not accept tax overviews.

*A tax overview is taken directly from the HMRC website and shows the tax liability in each tax year and the payments towards each liability. 

Now HMRC have stopped providing the SA302 forms, they have published a list of lenders who will accept a tax overview here. We can provide this tax overview breakdown to clients if you are applying for a mortgage.