Introduction to this document

Claiming the property allowance

The property allowance is a fixed tax deduction which can be claimed against rents and other income derived from property in place of the actual costs incurred in generating the income. It means that individuals can receive up to £1,000 of property-related income tax free.  However, special rules prevent its use for some types of property income.

Flow chart

The Flow Chart - Claiming the Property Allowance will help you decide if you are entitled to claim the property allowance for a tax year.

Definitions for the flow chart:

  • Relevant property business - broadly, any property business to which rent-a-room relief does or could not apply and is not relating to residential accommodation on financing costs, e.g. interest is incurred
  • Connected person - for the purposes of the trading allowance a person is connected to another person if they are that person’s:

 

  • spouse or civil partner
  • brother or sister
  • ancestor
  • lineal descendant
  • spouse’s or civil partner’s brother or sister
  • spouse’s or civil partner’s ancestor
  • spouse’s or civil partner’s lineal descendant

 

  • Associates - for most tax purposes means persons who are:
    • relatives:
      • a husband, wife, or civil partner
      • parents and remoter forebears
      • children and remoter issue, e.g. grandchildren; and
      • siblings
    • partners in any partnership
    • trustees of a trust the person is involved with
    • the personal representatives of a deceased person if the person has an interest in the estate

 

  • A close company - defined as any UK-resident company which is controlled by five or fewer participators, or any number of participators who are directors.

Document

Flow chart - claiming the property allowance

UPDATED15 Dec 2020
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