How does the GBP1,000 property income allowance work?

Full answer

The property income allowance of GBP1,000 per year was introduced in Finance Act 2017 (s17 and Schedule 3). It applies to gross income from property -- that is, your total rental receipts before any expenses. There are two key rules. Rule 1 -- full relief: if your total gross property income in a tax year is GBP1,000 or less, the income is completely exempt from Income Tax and does not need to be declared on a Self Assessment tax return. This is useful for occasional lettings, Airbnb income, or someone renting a car parking space. Rule 2 -- partial relief (the election): if gross property income exceeds GBP1,000, you can elect to deduct the GBP1,000 allowance instead of your actual allowable expenses. This makes sense only if your actual expenses are less than GBP1,000 (for example, if you have minimal costs on a property). If your actual expenses are higher than GBP1,000, you should deduct actual expenses instead -- that will give you a larger deduction and lower taxable profit. You cannot deduct both the allowance and actual expenses in the same year; it is one or the other. The property income allowance cannot create a loss -- if the GBP1,000 allowance exceeds gross income, the taxable profit is simply nil. Note that the allowance is separate from the Rent a Room scheme (which provides a GBP7,500 exemption for renting a furnished room in your own home). Where Rent a Room applies, you use that scheme instead. Joint owners each get their own GBP1,000 allowance separately against their share of the income. Make the election on your SA105 property pages of the Self Assessment tax return.

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