Property Allowance: The £1,000 Tax-Free Amount

What Is the Property Allowance?

The property allowance gives you £1,000 of tax-free property income each year. If your total gross property income (before expenses) is £1,000 or less, you do not need to report it to HMRC or pay any tax.

When It Applies

The property allowance is useful for:

• Occasional Airbnb hosting
• Renting out a parking space or garage
• Sub-letting a storage room
• Any small-scale property income

If Your Income Exceeds £1,000

If your property income exceeds £1,000, you have two choices:

Option 1: Use the Property Allowance

Deduct the £1,000 allowance from your income and pay tax on the remainder. You cannot claim any actual expenses if you use this option.

Example: £3,000 income, using the £1,000 allowance = £2,000 taxable.

Option 2: Claim Actual Expenses

Deduct your actual allowable expenses and pay tax on the profit.

Example: £3,000 income, £1,500 actual expenses = £1,500 taxable.

In this example, using actual expenses gives you a higher deduction (£1,500 vs £1,000), so Option 2 is better.

When to Use the Allowance

Use the property allowance when your actual expenses are less than £1,000. This is common for:

• Parking space rentals (minimal expenses)
• Occasional room lets with low costs
• Small amounts of property income where tracking expenses is not worthwhile

When to Claim Expenses Instead

Claim actual expenses when they exceed £1,000. This is typical for:

• Buy-to-let properties with mortgage interest, repairs, and insurance
• Properties with significant management costs
• Any property with expenses that clearly exceed the £1,000 threshold

Important Notes

• You cannot use both the allowance and actual expenses — it is one or the other
• The £1,000 applies to your total property income, not per property
• The Rent a Room Scheme (£7,500) is separate and more generous if you are letting a room in your main home
• The property allowance does not apply to income from a property you partly or wholly own through a partnership or company

Track your property income with Accounted and Penny will tell you whether the allowance or actual expenses gives you the better result.

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Small property income does not mean small tax savings. Sign up for Accounted and let Penny optimise your property tax position.