HMRC offers a £1,000 property allowance each year that could mean zero tax to pay on small bits of property income. And yes, it’s as good as it sounds (provided you know the rules). Let’s dive into this handy allowance — minus the tax jargon and with a few real-life examples along the way.

What Is the Property Allowance?

The property allowance is a tax-free amount of £1,000 per tax year for income you earn from property.

You can use it if you:

• Rent out a property or part of your home (but not under the Rent-a-Room scheme — more on that later).
• Let out land, a garage, a storage unit, or even a garden plot.
• Occasionally rent out a holiday home or Airbnb (as long as it’s not your main business).

Who Can Use It?

You’re eligible if your total property income is under £1,000 in the tax year – no tax, no need to register with HMRC or do a tax return. Easy!

If your property income is over £1,000, you can still use the allowance to reduce your taxable income by £1,000. Think of it as a tax-free boost.

What’s the Catch?

There are a few things to note:

You can’t use this allowance if you:

• Claim expenses under the normal property income rules and want to deduct actual costs instead.
• Rent to a company you own or a close family member (unless it’s at market rate and not part of your business).
• Use the Rent-a-Room scheme, which is different and has its own £7,500 limit.

So you’ll have to choose: either deduct the £1,000 allowance, or claim actual expenses – not both!

Let’s Break It Down with Some Examples:

Paul lets out their garage for £80/month = £960/year. That’s under £1,000 – no tax, no return needed.

Ben has a buy-to-let and earns £10,000 in rental income. His actual expenses are £2,500. He needs to choose:

• Claim £2,500 expenses, or
• Use the £1,000 property allowance (but that’s less – so not ideal here).

Why It Matters

This little-known allowance can save you time, paperwork, and even tax — especially if you’ve got low-level property income or one-off rentals.

And remember: if your property income is under £1,000 and there are no other reasons you need to file a tax return, HMRC says you don’t even need to tell them about it!

Can We Help?

Wondering if you’re better off claiming actual expenses instead of the property allowance? We can help.

As tax specialist based in Stoke, we’re here to take the guesswork out of tax — so you can focus on the stuff you love (like not thinking about tax).

Get in touch today for a no-stress chat about your rental income or property sideline by booking a free 15 minute discovery call with us.