Can you benefit from the £1,000 property allowance? - Makesworth Accountants

Can you benefit from the £1,000 property allowance?

Can you benefit from the £1,000 property allowance?

Can you benefit from the £1,000 property allowance?

If you have income from land and property, you may be able to take advantage of the property allowance. The allowance can be used in various ways.

Tax exemption

If your income from property is less than £1,000, the property allowance allows you to receive that income free from tax. Where the income is covered by the allowance, you do not need to tell HMRC about it.

However, claiming the allowance may not be beneficial if your property income is less than £1,000, but your expenses are more than £1,000 so that you make a loss. Claiming the exemption will mean that the loss is lost. To preserve the lost, you must provide HMRC of details of your income and expenses on your tax return.

However, as the loss can only be set against future profits from the same property income business, if you do not expect future receipts to exceed £1,000, there may be little benefit claiming the loss. You may prefer instead to take advantage of the exemption, saving the work associated with establishing the loss.

Expenses less than £1,000

The property allowance can also be beneficial if your income from property is more than £1,000, but your expenses are less than £1,000. Where this is the case, you will not benefit from the exemption, but you can instead deduct the property allowance of £1,000 to arrive at your taxable profit. This will give a favourable result.

Example

Wendy has income of £3,000 from letting a flat. Her associated expenses are £600. Under the normal rules, her taxable profit is £2,400.

See also  VAT registration sooner or later?

However, she can claim the property allowance and deduct £1,000 rather than her actual expenses of £600. This reduces her taxable profit to £2,400.

Jointly-owned property

Where a property is jointly-owned, each owner can benefit from the property allowance in respect of their share of the income. Where this is less than £1,000, the income is exempt and does not need to be reported to HMRC; where this is more than £1,000, the allowance can be deducted instead of actual expenses where this is beneficial.

For more information, Book a Free Consultation

Need Accountancy Support?

For information on bespoke training, or if you have any other questions for Makesworth Accountant, please fill in your details below

Accountancy Support

Your Name(Required)

Proud to be featured in

Happy with our services? Please leave us a Google Review. Click here