There have been quite a few changes to the taxation of rental income and rental properties in the past few years – removal of “Wear & Tear” allowance, restriction of relief for loan interest, increased exposure to Stamp Duty Land Tax, extra Capital Gains Tax. And here is another one – known as Property Income Allowance (“PIA”).
From 6th April 2017, if your income from property is less than £1,000, it is exempt from tax, and you don’t need to report it on your annual Tax Return.
If your total gross income from property is more than £1,000, you should include the details in your Tax Return, and either claim the new PIA or the allowable expenses – but you cannot claim both.
You are not able to claim the PIA if any of your property income is from a “connected party”. The income is from a connected party if it’s from (a) your employer (or the employer of your spouse or civil partner), (b) a partnership in which you or someone connected to you are a partner or (c) a close company owned by you, by others connected to you or together.
Whether you have one property business, or more than one, the total PIA that you claim cannot exceed £1,000.
You don’t have to claim this relief. It may be beneficial to you to claim expenses against the income instead, such that a loss is declared – and that loss may be available to be relieved against future property income.
If in doubt, or you would like to discuss this area of taxation, please contact a member of the Tax Department at Lambert Chapman LLP.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.