Property allowance

The property allowance is a tax rule that lets you earn up to £1,000 of gross property income in a tax year without paying tax on it. It is designed to simplify tax for small-scale landlords and people who receive modest income from property. For example, a spare room let outside the Rent a Room Scheme. If you use the allowance, you don’t deduct individual expenses, the £1,000 is treated as a flat deduction instead.

From a landlord perspective, the allowance is mainly relevant if your rental income is small or your allowable costs are low. You choose between:

You cannot do both for the same income stream. If your real expenses are more than £1,000, you will usually be better off claiming actual expenses rather than the allowance.

There are also important limits. You can’t use the property allowance against income from a company you, or someone connected to you, controls, and it doesn’t replace the requirement to report rental income when you’re above the thresholds. HMRC guidance explains eligibility and how the allowance interacts with record keeping and reporting.

Operationally, don’t confuse “tax-free allowance” with “cash profit”. Even if you qualify for the allowance, you still need to maintain your rental property, keep up property condition, and manage your tenant relationship and compliance. Tax doesn’t change your duties under the Landlord and Tenant Act 1985 for repairs, or the practical risks of housing disputes.

The Renters’ Rights Act doesn’t change the property allowance itself, but it can influence the predictability of rental cashflow. For example, rent increases moving through Section 13 notice and the end of Section 21 notice. That may affect whether a “small landlord” stays small, and how you plan and report your property income.

Also see our Making Tax Digital page and read our landlord blog articles on:

Also see our free landlord calculators

Small Landlord
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Small Landlord
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