What is the property income allowance?

The property income allowance makes the first £1,000 of property income tax-free each tax year, including 2026-27. Over £1,000, you can deduct £1,000 instead of your actual expenses, whichever gives the lower profit.

GOV.UK describes it as "a tax exemption of up to £1,000 a year for individuals with income from land or property." It sits alongside a separate £1,000 trading allowance for self-employed income. The rules below come from GOV.UK, checked on 16 October 2026.

How the allowance works at each level

Gross income means the total before any expenses or allowances. GOV.UK's renting guidance puts the Self Assessment line at £2,500 after allowable expenses or £10,000 before them, so check both if you are near £2,500. On the UK property pages of the tax return the allowance has its own box, 20.1.

Allowance or expenses: two examples

The allowance only helps when your actual costs are below £1,000.

A landlord lets a parking space and a small storage unit for £1,800 a year, with £300 of costs. Claiming expenses gives a profit of £1,500. Claiming the allowance gives £1,800 − £1,000 = £800. The allowance is better by £700 of taxable profit.

Another landlord has the same £1,800 of income but £1,200 of costs. Claiming expenses gives £600; the allowance gives £800. Expenses win here.

The allowance cannot create a loss. If your costs are higher than your income, claim the costs.

When you cannot use it

GOV.UK lists these cases:

• Income from a company you, or someone connected to you, owns or controls.
• Income from a partnership where you or a connected person is a partner.
• Income from your employer, or your spouse's or civil partner's employer.
• When you claim the tax reduction for finance costs, such as mortgage interest on a residential property.
• Income from letting a room in your own home under the Rent a Room scheme.

The mortgage point rules it out for most buy-to-let landlords with a loan, because they will want the mortgage interest reduction.

How you claim it

If you are not in Self Assessment and your gross property income is between £1,000 and £2,500, GOV.UK says to contact HMRC rather than register. If you already send a tax return, you deduct the £1,000 from your gross income on the return, and you then cannot deduct other expenses or allowances for that income as well.

If you use the allowance, GOV.UK says you must still keep records of your income. That meaning of gross income applies whether you use the cash basis or traditional accounting.

If you have more than one business, GOV.UK adds a caution: "If you have two businesses and claim the property allowance in one business you may not claim actual expenses in respect of the other business." Look at both together before you choose.

What this means for you

For a typical buy-to-let flat with rent of several hundred pounds a month, the allowance often does not help: agent fees, insurance and repairs can pass £1,000 on their own. It is most useful for small, low-cost income such as a garage, a parking space or a one-off short let.

Joint owners each get their own £1,000 against their share. Two owners splitting £1,600 of gross rent equally have £800 each, which is under £1,000 each.

Whichever you use, keep a record of your income. If your rent and any self-employed turnover is over £20,000 before expenses, Making Tax Digital (MTD) may apply to you, and qualifying income for MTD is counted before expenses.

Steps to decide

1. Add up your gross property income for the tax year, using only your share of anything jointly owned.
2. If it is £1,000 or less and none of the exclusions apply, it is tax-free and you need not tell HMRC.
3. If it is more, add up your actual allowable expenses.
4. Check whether you claim mortgage interest. If you do, you must use actual expenses.
5. Use whichever of £1,000 or your actual costs is higher, and enter it on your return.
6. Run the free MTD check to see whether quarterly updates apply to you, and read more in the landlord section.