Income Tax (Trading and Other Income) Act 2005 section 783AH

Partial relief: alternative calculation of profits: introduction

Section 783AH sets out the conditions under which an individual can qualify for partial relief by using an alternative method of calculating their trading and miscellaneous income profits, where their relevant income exceeds the trading allowance.

• An individual must have relevant income for the tax year and that income must exceed their trading allowance (currently £1,000) to be eligible for partial relief
• The individual must make a formal election under section 783AM for partial relief to apply — it does not happen automatically
• If partial relief is elected, the alternative calculation method replaces the normal rules for working out trade profits and miscellaneous income, applying across all of the individual's relevant income sources
• Choosing partial relief for one source of relevant income means the individual cannot deduct actual expenses for any other relevant trade — the trading allowance approach must apply to all relevant income or none