Property income allowance gives £1,000 tax relief.

[Melboy]

I am putting this information up on the forum as there may well be many new and experienced landlords who are not aware of this new'ish HMRC tax break that came into force a year or so ago.

Now I know most of us regular contributers to this forum have an accountant to deal with their property investments etc. but even I got caught out because my accountant was not aware that one of my properties was held in joint names with my business wife so therefore I could claim for her  £1,000 HMRC tax allowance as well as for me.

So for all you landlords with say just the one property and have an expense/repairs claim that comes in at under £1,000 pa you can claim this £1,000 property tax relief..........and if held in joint names £2,000.  You cannot claim this relief for each and multi owned properties you have......but just the once off.

Here it is in full for you all to have a read.

 

Property owners who receive an income from rent could be missing out on a recently introduced tax-free allowance potentially worth hundreds of pounds provided they have low rental income

Taxpayers can claim the property income allowance, which came into effect in April last year, giving the property owner £1,000 of tax relief on their rental income, provided they have few or no expenses. The allowance is worth up to £1,000 each tax year in tax-free allowances for property or trading income from 6 April 2017.

‘Depending on circumstances, this can be a fairly generous tax break for individuals who rent out their property, including land owners, for example farmers. A basic rate taxpayer can save up to £200, while higher rate taxpayers can save up to £400 by claiming the allowance,’ said Annalise Lovett FCCA, partner at chartered accountants Newby Castleman.

‘Because many landlords and property owners fill out their own tax returns, they may well have overlooked the property income allowance, especially as it only came into effect last year, and the 2017/18 tax return is the first time it can be claimed.’

The new allowance can be particularly beneficial to joint owners of property and land, for example married couples, as both parties are able to claim the allowance, ie, up to £1,000 each.

Where the allowance covers all of an individual’s relevant income (before expenses) then they will no longer have to declare or pay tax on this income.

Those with higher amounts of income will have the choice, when calculating their taxable profits, of deducting the allowance from their receipts, instead of deducting the actual allowable expenses. The trading allowance will also apply for Class 4 national insurance contribution purposes.

The allowance does not apply to partnership income from carrying on a trade, profession or property business in partnership. They cannot be used in conjunction with the relief available under the rent-a-room relief rules.

Lovett said: ‘It’s a relatively straightforward way of claiming back a potentially generous amount from the taxman, and if you’re completing your own tax return it might be easy to miss.’

The relief was introduced as part of Finance Act 2017, and introduced a new Part of Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), to give relief for two new annual tax allowances for individuals of £1,000 each, a trading allowance and a property allowance.

HMRC guidance, Tax-free allowances on property and trading income (updated guidance issued 6 April 2018)

 

[Richlist]

Thanks for posting this....I was unaware of the allowance.

I'm assuming the allowance covers ALL expenses.....mortgage interest, insurance, ground rent, service charges, phone, postage, car mileage, office expenses, repairs & maintenance etc.

Most people with one property will have expenses in excess of the allowance so it's gonna be better to claim the actual expenses.

[Mortitia]

Thanks Melboy - I'll pass this on.  When is say joint owners can that include brother and sisters?  Logic says yes but in the whacky world of HMRC I'm not sure.

[Richlist]

If the joint owners are related e.g. brother & sister.....it should make no difference as each joint owner would complete their own tax calculation.

[Melboy]

I am looking into this further to gain some more precise detail but I can tell you that my Son's accountant automatically, this financial year, deducted the £1,000 from the total rental income received and it does include everything including rates, ground charges etc. etc.  

I would say it's a scheme for only those who have perhaps the one property with the minimum of expenditure outlay.

 

[Beard]

Does this allowance apply to 1 property if you have say 10 properties 

[Melboy]

11 hours ago, Beard said:

Does this allowance apply to 1 property if you have say 10 properties 

1 property only. 

[kanrent]

On 1/28/2020 at 2:14 PM, Melboy said:

I am looking into this further to gain some more precise detail but I can tell you that my Son's accountant automatically, this financial year, deducted the £1,000 from the total rental income received and it does include everything including rates, ground charges etc. etc.  

I would say it's a scheme for only those who have perhaps the one property with the minimum of expenditure outlay.

 

I'm just wondering if you only have 1 property and you claim property income allowance on your tax return do you still have to complete the other boxes on the return stating your property expences 

[Melboy]

2 hours ago, kanrent said:

I'm just wondering if you only have 1 property and you claim property income allowance on your tax return do you still have to complete the other boxes on the return stating your property expences 

According to my Son's accountant.......no.  Son has the one small flat he rents out and his (experienced) business accountant automatically allows and submits the £1,000 tax allowance as per the guidelines in the government information published.

[kanrent]

Just been reading hmrc Web site

If you claim the property income allowance you can't claim any expences as we already know, unfortunately  I think these property expenses include the agents management fees 

[Gengar]

HI,

Can anyone advise what the position is on the £1000 tax relief with a rented property that has 3 or more owners. Can they all claim the the £1000 tax relief?

[Richlist]

I find it hard to believe that any landlord who has 1 small rental property has total expenses less than £1000 a year.

Even without a mortgage.....what about....agent fees, insurances, repairs & maintenance, ground rent, service charges, annual gas cert, electrical checks, accountant, postage, telephone, car mileage or capital expenses etc,etc.

No landlord I have ever known has total monthly expenses of less than £83 pcm.

Am I missing something here ?

In fact, anyone with expenses that total less than £1000 per year probably isn't claiming all of the allowances they are entitled to claim !

[Melboy]

20 hours ago, Gengar said:

HI,

Can anyone advise what the position is on the £1000 tax relief with a rented property that has 3 or more owners. Can they all claim the the £1000 tax relief?

Short answer is no. You can claim £1,000 on the single rented property against expenses incurred and not how many owners it has.

If you have multiple properties then it is just the one off tax allowance against a single property.

Full details can be seen on the HMRC rental property website, or please read my opening comment on this topic,

[Richlist]

I think I should add that I can see how with one jointly owned rental property, owners could get excited about having an easy way of claiming £2000pa in expenses.

But I really don't understand how for a single property with one owner £1000 goes anywhere near to covering expenses.

My conclusion is that they cannot be claiming all of the ownership costs permitted by HMRC.

[accidentaljosh]

Is this allowance still applied? And is it possible to apply for it if I purchased the property after 2020?
I bought an apartment around a year ago and have been renting it out for 9 months. I have already spent more than £1000 on maintenance. Is it possible to get this allowance?
Before purchasing the property, I did some calculations according to the model described at https://www.wallstreetoasis.com/resources/financial-modeling/accretion-dilution-model. It seemed to be the right time to buy real estate. Now I see that it was the right calculation because now the prices are much higher.

[Richlist]

Why do you think that a property purchased after 2020 cannot use the property income allowance ?

[Melboy]

14 hours ago, accidentaljosh said:

Is this allowance still applied? And is it possible to apply for it if I purchased the property after 2020?

Yes it is........ but read the comments above from 2020

[cliokounte]

I wish we had something like this in the US, because the housing market is becoming more and more unstable. There is a housing prices bubble, and I am not sure when it will explode and what will follow after this explosion.
Everyone is too cautious, and nobody wants to make any concrete moves: lenders, buyers, sellers, and builders. Everyone’s waiting for the prices to normalize, but I doubt it will happen anytime soon. According to https://timthomas.co/signs-of-a-housing-market-crash/, many people are (justifiably) afraid of losing their jobs, resulting in the real estate market stagnating.