VAT: bad debt relief, CGT: irrecoverable loans, Trading and property allowances

Last week we examined two situations in which tax relief for non-payment of debts or loans, can be claimed, or not. The answers are not obvious. We also examined the two new reliefs which came into force on 1 April, for sundry trading income, and income from property. The tax system is not getting any simpler!

Below is just an extract from last week’s tax tips email. You can register to receive future copies by following the link on the right (or below, if you’re reading this on a mobile device)

Trading and property allowances

As part of his 2016 Budget, George Osborne announced two new flat rate allowances of £1,000 each, which apply to sundry trading and property income from 6 April 2017. Unfortunately, there is very little guidance about these new allowances on We have linked to what there is below.

There is already a property allowance in the form of rent-a-room relief, now worth up to £7,500 per year. However, the new £1,000 property allowance cannot apply to property which qualifies for rent-a-room relief. So an individual can’t claim a tax exemption of £8,500 per year for letting a room in his own home.

However, the same taxpayer can claim £7,500 rent-a-room relief for letting a room to a lodger, and a further £1,000 for letting his driveway as a parking space. The income from letting the driveway doesn’t qualify for rent-a-room relief as the area must be let as residential accommodation to fall under rent-a-room relief.

The other £1,000 trading income allowance covers gross sundry income which could be from a trade, but also from providing services or hiring assets. The taxpayer can choose to deduct the allowance from his gross takings and pay tax on the balance without taking account of tax deductible expenses, or calculate his taxable income in the normal way and ignore the allowance.

Say Jade earns £1,200 from selling the jewellery she makes in her spare time. She can deduct the trading allowance of £1,000 and pay tax on £200, or deduct the cost of the materials which total £1,150, and pay tax on £50.

Neither of the new property or trading allowances can be set against income the taxpayer receives through a partnership, or from his own company, or from a company that employs him or his family members