BIM86000 - Trading and Miscellaneous Income Allowance (TMIA)

The trading and miscellaneous income allowance gives relief to an individual with relevant income (BIM86007) from relevant trade(s) , and/or Miscellaneous Income otherwise chargeable, up to the amount of the trading allowance which is £1,000. The allowance applies from 6 April 2017.

The legislation covering these measures is included as S783A –S783AR Income Tax (Trading and Other Income) Act 2005 (ITTOIA).

If an individual qualifies for full relief (BIM86011) the individual’s relevant income from relevant trades and/or miscellaneous income is treated as nil, and not charged to income tax. Use of the trading allowance is optional, and it may not suit an individual’s circumstances for example if a trade is loss making (BIM86076). If an individual does not want to use the trading allowance, he or she should make an election for full relief not to apply (BIM86025) and calculate their profits using the normal rules and complete their Self Assessment tax return in the normal way.

Individuals whose relevant income from a relevant trade or Miscellaneous Income is more than the trading allowance can choose between:

- treating their taxable profit as the amount by which their total relevant income exceeds the trading allowance, without any separate relief for expenses or capital allowance (“partial relief”) by making an election for partial relief (BIM86015); or

- calculating their taxable profits in the normal way on total income less actual expenses and capital allowances (the “profit method”).

Whichever method is used, the individual is chargeable to Income Tax and Class 4 NICs on the taxable profits. In the absence of the relief, profits would be chargeable to Income Tax either as the profits of a trade or as Miscellaneous Income in the normal way. Individuals can only use the allowance to reduce their taxable income to nil, the allowances cannot be used to generate a loss.

Individuals whose relevant income includes income from a connected party are not eligible (BIM86030) for the trading allowance for that tax year.

You can find a simple introduction to the trading allowance on the HMRC Internet site by searching on tax-free allowance on property and trading income. This sets out other circumstances where an individual qualifying for Full relief may be required to register for self-assessment or class 2 National insurance contributions.

You may find it helpful to look at these introductions before reading the detailed guidance in this section of the BIM.

BIM86005 Definitions: Relevant Trade

BIM86007 Definitions: Relevant Income from Relevant Trades and Miscellaneous Income

BIM86010 Computation Overview

BIM86011 Computation: Full Relief

BIM86015 Computation: Partial Relief

BIM86025 Elections

BIM86030 Exclusions

BIM86040 Other Considerations

BIM86070 Examples