How can you claim your £1,000 property allowance?

The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property.

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.

It was introduced in Finance Act (No2) 2017.

I have seen may tax payers use it incorrectly on their returns, putting in the allowance and claiming expenses, which is incorrect.

The property allowance applies to

  • UK and Overseas property businesses
  • Commercial and Residential Lettings

There are exclusions

  • Rent a Room – PIM4424
  • Individuals claim the Base Rate Finance Cost Allowance – PIM4460
  • Partnership Property – PIM4454

If your property income from UK and Overseas properties is less than £1,000 you will get full relief and don’t need to file a self assessment return.

If your income is over a £1,000 from UK and Overseas Property then you can choose whether its worthwhile, for example if your expenses exceed £1,000 you would not want to use the allowance as you can claim the actual expenses, there are some examples in PIM4482.

The Property Allowance can not create a property loss to carry forward.

If your property income exceeds £1,000 and you elect to use the Property Allowance, that would be ‘Partial Relief’.

You can choose to either deduct the £1,000 or the actual costs (this is bit I have seen incorrectly noted on tax returns, basically landlords have tried to claim both, which is not allowed)

You can decide on a year by year basis which is better – £1,000 or the actual costs.

Elections must be made by the 31st January following the tax year.

Here is an example from PIM4483

Stephanie computes partial relief as follows:

Step 1 – Calculate Total Receipts of the relevant property business:

The total receipts of the relevant property business is £1,200.

Step 2 – Subtract the Deductible Amount from Receipts:

The £1,000 allowance is subtracted from the total receipts for her property business. This leaves £200 (£1,200 – £1,000) of taxable profits for Stephanie’s property business.

The legal fees of £150 are not brought into account because you cannot claim both the property allowance and expenses.

There is further guidance at PIM4400

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