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

Partial relief: alternative calculation of trade profits

Section 783AI sets out an alternative method for calculating trade profits where an individual qualifies for partial relief and their relevant income includes receipts from one or more trades.

• Where an individual qualifies for partial relief and has trading income, the trading allowance is deducted from total trade receipts instead of actual expenses
• The calculation follows three steps: total up all trade receipts, subtract the trading allowance (the deductible amount), then subtract any overlap profit deductions
• The deductible amount is normally equal to the individual's trading allowance (£1,000), unless the allowance must be split across multiple income sources
• Any overlap profit relief available on cessation of a trade or on a change of accounting date is still given after the trading allowance deduction

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