Property Income Allowance

What is Property Income Allowance? A Beginner’s Guide

Property income allowance is a tax-free allowance on the income earned from building, land or property. It came into effect on April 6, 2017. It is a relief given to property owners on their rental income. If you are joint owners, then each one of you can claim this allowance.

Curious to know more, read till the end to explore more about this allowance!

In this article, you will get to know about: 

  • What is a property income allowance? 
  • When was PIA introduced?
  • What if a person owns the property jointly?
  • How to claim it?
  • Points to remember


What Is Property Income Allowance (PIA)?

Property Income is an income generated from land or building. If the income is less than £1000, then you don’t need to do anything about it as it is tax-free. The property income allowance is a relief of £1000 to property owners on their property income. 

If the income is under £1000, you don’t need to tell HMRC about the income. Because it’s totally tax-free. And in case if the income is between £1000 and £2500, then you need to contact HMRC. 

However, other rental expenses cannot be claimed along with PIA. If you are using property allowance, then you are not allowed to claim any loss or deductions for property expenses. Landlords are allowed to claim expenses of maintaining and running their property. 

Bear in mind that you cannot claim property income allowance and expenses at the same time.PIA and trading income allowance can both be claimed as per your situation.

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When Was Property Income Allowance Introduced? 

It came into effect on 6 April 2017 and was introduced as a part of the Finance Act 2017 and a new part of the Income Tax Act 2005. It gives relief of £1000 to property owners who can individually claim it. Property income allowance applies to both commercial and residential properties.


What If A Person Owns Property Jointly? 

If you own the rental property jointly with your spouse or with any other civil partner, you both can individually claim the property allowance, even if you both share the rental income. It gives relief to both individuals.

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How To Claim Property Income Allowance?

To claim it, you don’t need to file a tax return if your income is below £1000 from rental income, instead you can claim the property income allowance. The claiming of property income allowance depends on your situation. 

Furthermore, if you deduct more than the amount of your income, it will result in loss.

If you are using PIA then you need to keep a record of your income in case if your records are not accurate, as HMRC may charge you a penalty.

As well as if you are not having any other reason to file a tax return and your income is under £1000 then you don’t need to submit a self-assessment tax return for claiming PIA. But you need to keep the records of your income to prove it.

Likewise, if your income goes above this allowance then you have to register as a landlord. If you are already registered for self-assessment, you can claim PIA on your return.

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Points To Remember

You should take into account the below-explained factors before you decide to use it:

  • If you own the property jointly with your other partner in this case you both can claim the Allowance. 
  • You can also claim trading income allowance and property income allowance. This can also be used for foreign property rental income.


Quick Sum Up

Hope you have got a better understanding of property income allowance. It is £1000 for the year 2021-2022. The tax on your property income would be the same as your personal income. You won’t need to file a return or need to inform HMRC if your property income is below the property allowance.


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Disclaimer: This blog contains general information on the topic.


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