Property and trading income allowances could simplify some individuals’ tax position
The Chancellor has announced today in the Budget that from 6 April 2017, there will be two new allowances for individuals with small amounts of property income or trading income. Each allowance will be £1,000.
Anthony Thomas, Chairman of the LITRG, said:
“Individuals with small amounts of property income or trading income will welcome the simplification announced today. Those with property income or trading income below £1,000 will no longer have to tell HMRC about the income or pay tax on it. If their property or trading income exceeds the allowance, they will be able to choose whether to calculate their taxable profit in the usual way or by simply deducting the £1,000 allowance.”
Anthony Thomas explained:
“The Government has announced that two new allowances will be introduced with effect from 6 April 2017. At first glance, it appears that these will offer a simplification of the tax position for individuals with either small amounts of property income or small amounts of trading income or both. This might be of particular benefit to individuals who occasionally sell items at a profit online or who get income from the sharing economy. However, we will be watching carefully for the detail on the operation of these allowances.
“Normally, people with property income or trading income must notify HMRC of their activity. It is not clear at this stage whether or not the obligation to notify HMRC is removed entirely where the income from trading or property rental is below £1,000.
“A further concern is that these allowances might mean that affected individuals are unaware of the ability to claim losses when appropriate. In addition, we note that two measures due to take effect from 6 April 2016 were also given the name “allowance”, but they are in fact nil rate bands of tax. On that basis, we offer a cautious welcome to these new allowances.”
Notes for editors
Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties.