Property Income Allowance

Key facts

The property income allowance gives you £1,000 tax-free from property income each year.
If your gross property income is £1,000 or less, you have no tax to pay and no need to report it.
If your income exceeds £1,000, you can choose to deduct £1,000 instead of actual expenses.
It is separate from the £7,500 Rent-a-Room Scheme — you cannot use both on the same income.
The allowance applies to all property income, including from properties you do not live in.

Overview

The property income allowance (sometimes called the “property allowance” or “micro-entrepreneur allowance for property”) gives individuals a £1,000 tax-free allowance for income from property. It was introduced in April 2017 to simplify reporting for people with small amounts of property income.^[1]

How It Works

There are three scenarios:

Gross Property Income	What to Do
£1,000 or less	No tax to pay. No need to register for Self Assessment or report the income.
Over £1,000 (using allowance)	Deduct £1,000 from gross income. Pay tax on the remainder. No actual expenses can be claimed.
Over £1,000 (using expenses)	Deduct actual allowable expenses. Pay tax on the net profit. The £1,000 allowance cannot also be claimed.

Worked Example

You rent out a garage space for £2,400 per year. Your only expense is £200 for insurance.

Method	Taxable Amount
Using £1,000 allowance	£2,400 − £1,000 = £1,400
Using actual expenses	£2,400 − £200 = £2,200

The property allowance gives the lower taxable amount in this case. However, if your expenses were £1,500, using actual expenses (£900 taxable) would be better than the allowance (£1,400 taxable).

Tip: Always compare both methods. Use the £1,000 allowance when your expenses are low. Use actual expenses when they exceed £1,000 or when you want to carry forward a loss.

Property Allowance vs Rent-a-Room Scheme

These are two separate reliefs and you cannot use both on the same income:

Feature	Property Allowance	Rent-a-Room Scheme
Tax-free threshold	£1,000	£7,500
Applies to	All property income (any property)	Furnished rooms in your own home only
Must live in property?	No	Yes
Can claim expenses?	No (if using the allowance)	No (if using the scheme)

If you let a room in your own home and earn under £7,500, the Rent-a-Room Scheme is far more generous. Use the property allowance for income from properties you do not live in.

Who Benefits Most?

The property allowance is most useful for:

People who rent out a parking space or garage
Occasional Airbnb hosts who let a separate property infrequently
People who receive small amounts of wayleave income
Anyone with gross property income just above £1,000 and minimal expenses

Restrictions

You cannot use the property income allowance if:^[1]

You receive income from a connected person (e.g. a company you control)
You are claiming the Rent-a-Room Scheme on the same income
You are a partnership (partnerships have their own rules)

Frequently Asked Questions

Who can use the property income allowance?

Any individual with property income can use it. It is most useful for those with small amounts of rental income (e.g. renting out a parking space, occasional Airbnb lets, or a storage room) where expenses are minimal.

Can I claim the property allowance and also claim expenses?

No. You must choose one or the other. If you use the £1,000 allowance, you cannot also deduct actual expenses. If your expenses exceed £1,000, it is usually better to claim actual expenses instead.

Does the property allowance apply to income from abroad?

Yes. The £1,000 allowance covers all property income, including from overseas properties. However, there is only one allowance of £1,000 total — it is not £1,000 per property.

Sources

Tax-free allowances on property and trading income — GOV.UK
Work out your rental income when you let property — GOV.UK

Property Income Allowance (£1,000)