What does section 688 of ITTOIA 2005 charge to income tax?

Section 688 charges income tax on the full amount of income falling within Chapter 8 of Part 5 of the Income Tax (Trading and Other Income) Act 2005 that arises in the tax year. There is no apportionment or deferral — the entire amount arising in the year is brought into charge under United Kingdom law.

Can the trading allowance reduce the income tax charge under section 688?

Yes. The trading allowance under Chapter 1 of Part 6A may provide full or partial relief where the income counts as relevant miscellaneous income. If income does not exceed the £1,000 allowance, full relief applies and no tax is due. If it exceeds £1,000, the individual may elect partial relief using an alternative calculation method.

What other reliefs may reduce the charge under section 688 of ITTOIA 2005?

Rent-a-room relief under Chapter 1 of Part 7 may reduce or eliminate the charge for individuals letting furnished accommodation in their main residence. Qualifying care relief under Chapter 2 of Part 7 applies to foster carers providing qualifying care. Special rules for foreign income in Part 8 may also modify the charge.

How does rent-a-room relief interact with the income charge in section 688?

Rent-a-room relief under Part 7 Chapter 1 can reduce or remove the section 688 charge where an individual receives income from letting furnished accommodation in their only or main residence. The individual may obtain full relief or use an alternative calculation method for partial relief, depending on the level of income involved.

Income Tax (Trading and Other Income) Act 2005 section 688

Income charged

Section 688 establishes how income falling within Chapter 8 of Part 5 is charged to tax and identifies the reliefs that may reduce or eliminate that charge.

Tax is charged on the full amount of income arising in the tax year.
The trading allowance (Part 6A, Chapter 1) may provide full or partial relief where the income counts as relevant miscellaneous income.
Rent-a-room relief (Part 7, Chapter 1) and qualifying care relief (Part 7, Chapter 2) can each reduce or remove the charge where the individual meets the relevant conditions.
Special rules for foreign income in Part 8 may also modify the amount charged.

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