Property Income Allowance - Better than Nothing!

Property Income Allowance

In the UK, the Property Income Allowance allows individuals to receive up to £1,000 in rental income tax-free each year. This is a personal allowance, meaning each individual is entitled to the £1,000 allowance.

For a husband and wife who jointly own a rental property, each person can claim their own £1,000 property income allowance, resulting in a total of £2,000 that can be deducted from their combined rental income.

Here’s a more detailed breakdown:

1. Individual Allowance: Each individual is entitled to the £1,000 property income allowance.
2. Jointly Owned Property: When a property is jointly owned, the rental income is typically split according to the ownership share. In most cases, this is 50/50 for a husband and wife unless otherwise specified.
3. Deduction: Each person can deduct up to £1,000 from their share of the rental income.
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Example Calculation

Assuming a rental income of £4,000 for a jointly owned property:

• Total rental income: £4,000
• Rental income per person (assuming 50/50 split): £2,000 each
• Property Income Allowance per person: £1,000
• Taxable rental income per person after allowance: £2,000 - £1,000 = £1,000
• Combined taxable rental income: £1,000 + £1,000 = £2,000
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So, in this scenario, the husband and wife can together claim a total deduction of £2,000, resulting in only £2,000 of their rental income being taxable.

Important Notes:

• The allowance is optional, and individuals can choose whether to use the property income allowance or to deduct actual expenses from their rental income, depending on which is more beneficial.
• If the actual expenses are higher than £1,000, it might be more advantageous to claim the actual expenses instead of the property income allowance.
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Conclusion

Each partner can  claim £1,000 as a deduction from their share of rental income, provided they each have rental income to apply the allowance against.  This is an alternative to claiming for actual expenses.