Property allowance: £1,000 of tax-free property income

Many people earn a little from property without knowing the first £1,000 a year is tax-free. This relief is the property allowance.

How does the relief work?

The property allowance is a tax exemption of up to £1,000 a year on income from land or property: for example renting out a parking space, storage, land or part of a home (outside the Rent a Room scheme). You deduct up to £1,000 from gross income instead of claiming actual expenses. You cannot deduct more than you earn, so you cannot create a loss.

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When do you not need to tell HMRC?

If your gross property income for the year is £1,000 or less, you generally do not need to report it or tell HMRC. If it is over £1,000, you can deduct the £1,000 allowance and pay tax on the rest — or, if better, claim your real expenses instead of the allowance.

When can you not use it?

The property allowance cannot be used if the income comes from a company you or a connected person controls, a partnership you are in, or your employer (or your spouse's or partner's employer). It also cannot be combined with the Rent a Room scheme or with finance cost relief (such as mortgage interest) on residential property — you must choose one.

What should you keep in mind?

There is also a trading allowance — the same £1,000 exemption on income from small side work and self-employment. They are counted separately: you can use both if you have both types of income. Detailed rules and examples are on GOV.UK. If you are unsure whether the allowance or real expenses are better, work out both or get advice, especially when income is near the thresholds.

How does the property allowance differ from Rent a Room?

They are different reliefs. Rent a Room exempts up to £7,500 a year from letting a furnished room in your own home. The property allowance (£1,000) is for other property income: parking, storage, land. You cannot apply both to the same income, so choose whichever is better for your situation.

When is claiming real expenses better?

If your actual costs of earning the income (repairs, services, fees) are more than £1,000, it is usually better to claim those rather than the allowance — your taxable income is then lower. If you have almost no costs, the allowance is simpler and spares you keeping receipts. You cannot use both on one source. If income is over £1,000 and must be declared, you do so through Self Assessment; if unsure, work out both options or get advice.