The £1,000 property allowance

The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property. If your gross property income is £1,000 or less, you usually do not need to tell HMRC about it, and if it is more, you can deduct £1,000 instead of your actual expenses. This guide explains how the allowance works, when you cannot use it and how it differs from the rent a room scheme. It is general information, not tax advice.

Who the allowance is for

The allowance is aimed at people with small amounts of income from land or property, the kind of money that does not feel like a business at all. GOV.UK gives renting out land, such as your driveway, as one example of income from property. It also helps a landlord whose rent is small and whose costs are low.

The test is your gross property income, meaning the total you receive before any costs. If you own a property jointly, each owner can use their own £1,000 allowance against their share of the gross rental income. There is a separate £1,000 trading allowance for income from selling goods or services, and the two can be used side by side, as our guide to the trading allowance explains.

When you need to tell HMRC

How much you have to do depends on your gross property income for the tax year. The thresholds below come from GOV.UK and apply in 2026 to 2027. If you do need to register for self assessment, the deadline is 5 October after the end of the tax year in which you first had the income.

Property income and reporting to HMRC (GOV.UK)
Gross property income in the year	What you need to do
£1,000 or less	Usually nothing, if you can use the allowance
Over £1,000 up to £2,500	Contact HMRC
Over £2,500	Register for self assessment

Choosing the allowance or your actual costs

Once your property income is over £1,000, you choose each year between two approaches. You can deduct up to £1,000 from your income using the allowance, but not more than the amount of your income, or you can deduct your actual allowable expenses in the usual way.

The allowance is all or nothing. If you claim it, you cannot deduct any other expenses or allowances against that income. It also cannot create a loss, so if your costs were higher than your rent, GOV.UK points out that claiming expenses may work out better. As a rough rule, the allowance suits income with very few costs, while a let with repairs, agent fees and insurance usually does better with the actual figures. The list of costs landlords can claim is in our guide to how rental income is taxed.

When you cannot use the property allowance

GOV.UK sets out several situations where the allowance is not available. You cannot use it in a tax year on property income from:

a company owned or controlled by you or by someone connected with you
a partnership in which you or a connected person are a partner
your employer, or the employer of your spouse or civil partner

You also cannot use the property allowance if you claim the tax reduction for finance costs, such as mortgage interest, on a residential property. A landlord with a mortgage therefore has to compare the allowance with their actual expenses plus the mortgage interest reduction, which our guide to mortgage interest tax relief explains.

The property allowance and the rent a room scheme

If you let furnished accommodation in your own home, the rent a room scheme usually applies instead. It lets you earn up to £7,500 a year tax-free, or £3,750 if you share the income with someone else, and the exemption is automatic if you earn less than your threshold. You can let as much of your home as you like under the scheme, but it does not cover a home that has been converted into separate flats.

The two cannot be mixed for the same income. You cannot use the property allowance on income from a room in your own home under the rent a room scheme, and you cannot use it if you choose to deduct expenses from that room income instead.

Is the allowance changing?

The Budget on 28 October 2026 announced an increase in the trading allowance from £1,000 to £3,000 from April 2027, which is not yet law. The GOV.UK policy paper on that change does not mention the property allowance, and we have not seen any announced change to it on GOV.UK, so it remains £1,000. If your property income is growing and you would like help with the return, we read every enquiry and, where we can, we will put you in touch with a local accountant. You can see how it works first.

Common questions

Do I need to tell HMRC if I rent out my driveway?

Not if your gross income from it, together with any other property income, is £1,000 or less in the tax year and you can use the property allowance. Above that you either contact HMRC or, over £2,500, register for self assessment.

Is the £1,000 property allowance per property or per person?

Per person. Each individual gets one allowance of up to £1,000 a year against their total gross property income. If you own a property jointly, each owner can use their own allowance against their share.

Can I use the property allowance and still claim my letting agent's fees?

No. If you claim the allowance you cannot deduct any other expenses against that income, so the agent's fees would be lost. Compare the two totals and use whichever gives the lower taxable profit.

Which is better for a lodger, the property allowance or rent a room?

For a furnished room in your own home, the rent a room scheme normally applies, with a threshold of £7,500 a year, or £3,750 if the income is shared. You cannot use the property allowance on income that falls under the rent a room scheme.

Sources for the figures on this page

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