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HMRC internal manual

Property Income Manual

Property allowance: contents: overview

S783B - S783BQ Income Tax (Trading and Other Income) Act 2005 (ITTOIA) gives relief to an individual on certain income of a relevant property business (PIM4422) , up to the amount of the property allowance.

For the tax year starting 6 April 2017, the property allowance is £1,000.

If an individual qualifies for Full Relief the individual’s relevant property income (PIM4426) is not charged to income tax and they have no obligation to notify HMRC if this is a new source of income. If an individual ceases to be eligible for Full Relief in a subsequent year, the individual would have to notify HMRC of chargeability (see PIM4440).

Use of the property allowance is optional, and it may not suit an individual’s circumstances, for example if a property business is loss making. If an individual does not want to use the property allowance, he or she should make an election for full relief not to apply (PIM4440) and calculate their profits using the normal rules and complete their Self Assessment tax return in the normal way.

If the individual qualifies for Partial Relief then this legislation gives the individual a choice over how they the individual’s property profits are calculated.

Individuals whose relevant income includes income from a connected party are not eligible for the property allowance for that tax year (see PIM4454 onwards)

You can find a simple introduction to the property allowance on the HMRC Internet site by searching on tax-free allowance on property and trading income. You may find it helpful to look at these introductions before reading the detailed guidance in this section of the PIM.

This guidance will look at the following:

  • Relevant definitions

  • Computations

  • Elections

  • Exclusions from the allowance

  • Other considerations