Micro-Entrepreneur’s relief was announced in the March 2016 budget, coming into force from 2017/18. This is a £1,000 allowance from property and trading income working in a similar way to the current rent-a-room relief in that the first £1,000 of gross income is exempt from income tax. If your income is above £1,000 then you have 2 choices, either deduct your actual expenses to arrive at a profit, or claim the £1,000 (which you would if it was higher than the expense) and pay tax on the rest.

In practical terms this will be useful to those who have small amounts of say, consultancy work, in addition to their employed income. Also could be very useful for some landlords. We may have a situation that your rental property is mortgage free and incurs very little in the way of costs to keep running, so the £1,000 allowance could be useful.

Furthermore if your rental property is jointly owned, both husband and wife are entitled to the allowance raising it to £2,000. The allowances are also exclusive so you can use £1,000 against rental income and a further £1,000 against trading income. So in a very contrived example you may jointly own a rental property as described above and both carry out some consultancy work with no direct costs as such, so you could end up with £4,000 of allowances, potentially saving £800 in tax, which could even raise to £1,600 if you’re both higher rate tax payers.

The date for claiming this relief for 2017/18 is 31st January 2020, so if you think you would have benefited from this but have already submitted your 2018 tax return, it’s not too late. If you want advice on this (or anything else tax related) please feel free to give me a call.