What is the difference between the trading allowance and the property allowance?

Full answer

The trading allowance and the property allowance are two separate GBP 1,000 tax-free allowances for 2026/27. The trading allowance covers miscellaneous and self-employment income - freelancing, selling online, casual work, or a side hustle. The property allowance covers income from land and property, for example renting out a driveway, storage space, or a property (note the separate, more generous Rent a Room scheme exists for letting furnished rooms in your own home). They work the same way. If your gross income from that source is GBP 1,000 or less in the tax year, it is fully covered by the allowance and you usually do not need to report it. If your gross income is above GBP 1,000, you can choose either to deduct the GBP 1,000 allowance from your turnover (full relief) or to deduct your actual allowable expenses instead - whichever gives the lower taxable profit. You cannot claim both the allowance and actual expenses on the same income. Because they are distinct allowances, someone with both a side business and a small property income can use both: up to GBP 1,000 against trading income and up to GBP 1,000 against property income, GBP 2,000 of tax-free income in total. Worked example: you earn GBP 1,400 from freelance work and GBP 600 from renting a parking space. The GBP 600 property income is fully covered by the property allowance and need not be reported. For the freelance income you deduct the GBP 1,000 trading allowance, leaving GBP 400 taxable, which is taxed at your marginal rate (20%, 40% or 45% in 2026/27) and may attract Class 4 NI if your total self-employed profit exceeds GBP 12,570. Who this affects: people with small side incomes. If your expenses exceed GBP 1,000, claim actual costs instead. Use a self-employed tax calculator to compare the two methods.

Try the calculator