Q: I’ve heard there is a new £1,000 property allowance that applies to property income, can I claim it?
A: From 6 April 2017, you can get a tax-free allowance for property income. The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property. If your annual gross property income is more than £1,000 you can use this property allowance instead of deducting any actual expenses incurred. If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income. If your annual gross property income is £1,000 or less, you won’t need to tell HMRC. There is more about the allowance and who can use it here: Tax free allowances on property and trading income and at UKPN3 of the SA105 notes: UK property notes.
Q: My income is below £1,000 and falls under the category of the property income allowance, however, I have losses brought forward but I cannot seem to use the losses on my tax return. How can I keep the losses going forward, or do I have to lose them?
A: If a landlord has relevant property income below £1,000 then the relievable receipts and the associated expenses of the property business for the tax year are not brought into account. They will get full relief and won’t need to report the rental income to HMRC. In this situation, there would be no rental profit to offset the brought forward losses against. Note, the property allowance cannot create a loss. Any unused, brought forward losses will be carried forward and set off against future rental profits, as and when they arise. You can find more guidance here: Property allowance .
Q: My husband and I jointly own a property, how does the £1,000 property allowance work in our case?
A: If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income. Use the link for more guidance: Property allowance .
Q: I have a let property in the UK and one in Spain as well; do I get the £1,000 property allowance against each of them?
A: If a landlord has more than one property business, for example a UK and an overseas business, only a single £1,000 allowance is available. The £1,000 can be allocated between the different businesses based on the landlord’s preference. You can find more guidance here: Property income manual 4438.
Q: Are there any expenses I can claim if I am using the £1,000 property allowance?
A: When you claim the property allowance, you cannot deduct any expenses when calculating the profits for the tax year. This includes any restricted finance costs and the basic rate tax reducer. Remember, use of the property allowance is optional; it may not suit an individual’s circumstances, for example if a property business is loss making, the property allowance itself cannot create a loss. Please refer to page 1 of the SA105 notes:UK property notes.
Q: Is there a box on the tax return for me to claim the £1,000 property allowance?
A: From 6th April 2017, if your income from property, including any foreign property, is £1,000 or less, it is exempt from tax and doesn’t need to be reported on a tax return. If your property income exceeds £1,000 and you are claiming the property income allowance you must enter your total rental income in the relevant section of the return. There is an additional box for you to subtract the property allowance from the appropriate rental receipts. Remember, it cannot exceed £1,000 or create a loss. There is further information on the SA105 notes: UK property notes.
Q: I have a lodger in my own house but also rent out another property, can I claim both rent a room relief and the property allowance?
A: The first point to note is rent a room receipts do not qualify for the property allowance. If your rent a room receipts are less than the £7,500 rent a room exemption limit, they will be exempt from income tax. However, the property allowance can apply to the receipts from your other property income, even if you are claiming rent a room relief against the income from your lodger. You can find more guidance here: Property allowance .