What is partial relief under section 783AM of ITTOIA 2005?

Partial relief under section 783AM allows an individual whose relevant income exceeds the £1,000 trading allowance to elect to deduct the trading allowance as a flat-rate deduction instead of claiming actual business expenses. This simplifies profit calculation and can reduce taxable income where actual expenses are low.

Who is eligible to elect for partial relief under the trading allowance?

Any individual whose relevant trading or miscellaneous income for a tax year exceeds their £1,000 trading allowance is eligible to elect for partial relief. The election covers all of the individual's relevant trades for that tax year, not just a single trade, and is made via self-assessment.

What is the deadline for making a partial relief election under section 783AM?

The election must be made no later than the first anniversary of the normal self-assessment filing date for the relevant tax year. For example, for the 2023/24 tax year with a filing date of 31 January 2025, the election deadline would be 31 January 2026.

When is it beneficial to elect for partial relief instead of claiming actual expenses?

Partial relief is beneficial when actual business expenses are less than the £1,000 trading allowance. By electing partial relief, the individual deducts £1,000 instead of lower actual expenses, reducing taxable profits. If actual expenses exceed £1,000, it is generally better not to elect and claim actual expenses instead.

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

Election for partial relief

Section 783AM allows an individual to elect for partial relief where their relevant income exceeds the trading allowance, and sets out the conditions and time limits for making such an election.

An individual may elect for partial relief for a tax year, but only where their relevant income exceeds their trading allowance for that year
Partial relief provides an alternative way of calculating trade profits or miscellaneous income, by deducting the trading allowance instead of actual expenses
The election must be made no later than the first anniversary of the normal self-assessment filing date for the tax year in question
The election applies for the tax year for which it is made and covers all relevant trades carried on by the individual in that year

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