The UK offers two special allowances that can simplify your tax return: the trading allowance and the property income allowance. Each provides up to £1,000 of tax-free income, making them ideal for people with small amounts of extra income.

The Trading Income Allowance

• Covers self-employed earnings or casual income (such as freelancing or side hustles).
• If your trading income is £1,000 or less, you don’t need to declare it to HMRC.
• If you earn more than £1,000, you can choose either:
  • Deduct the £1,000 allowance from your income, or
  • Deduct your actual allowable expenses if they’re higher.

The Property Income Allowance

• Covers income from property rental, such as letting out a driveway, spare room (outside of Rent a Room relief), or short-term lets.
  
• Works the same way: income up to £1,000 is tax-free; above that, you can claim either the allowance or actual expenses.

The Rent a Room Allowance

This is a UK a tax scheme that allows individuals to earn up to £7,500 per year tax-free from letting out furnished accommodation in their main home. This scheme is automatic if the income stays below the threshold, and no tax return is required. If income exceeds the threshold, however, a tax return must be completed.