New tax free allowances started on 6th April
The £5,000 dividend and savings allowance of up to £1,000 have been with us since 6 April 2016. There are now two further allowances available since 6 April 2017. There are concerns that these have not been widely publicised and not properly understood.
The first £1,000 allowance is against self-employed income. This is a deduction from gross income so will only be of benefit to those with a small amount of self-employed income – for example a part time yoga teacher. If their gross self-employed income is less than £1,000 a year then it will now be tax free and will not need to be reported to HMRC. If the income is marginally above £1,000, say £1,200, then only £200 will be taxable. For many self-employed it will continue to be more beneficial to compute profits by deducting their allowable expenses from their gross income.
The other new allowance is a £1,000 deduction from gross income from property. For example a couple might receive £700 in charges for parking on their drive in Wimbledon during the tennis tournament.
Joint owners of property could receive £1,000 tax free each, however you can’t claim the allowance on income from letting your own home under the Rent a Room Scheme.