The HMRC property income allowance is a £1,000 tax exemption that you can use against your rental income from property or land in the UK or the European Economic Area (EEA). This allowance was introduced to simplify income tax obligations for small-scale landlords.
Who can claim the property income allowance?
- Individuals who earn rental income from residential or commercial property.
- Landlords of furnished holiday lettings in the UK or EEA.
Key aspects of the property income allowance include:
- If your annual gross rental income is £1,000 or less, you do not need to report it to HMRC.
- If your rental income exceeds £1,000, you can elect to deduct the £1,000 allowance from your gross rental income instead of actual expenses related to renting out the property.
Limitations:
- You cannot use the property income allowance if you’re renting out your own home and already claiming Rent a Room Scheme relief.
- It cannot be used in conjunction with actual expenses against rental income. It's a choice between deducting actual expenses or claiming the allowance.
How to claim
To claim the property income allowance, you should indicate this choice on your Self Assessment tax return. If your rental income is below the £1,000 threshold, and you have no other need to complete a tax return, you wouldn't need to report this income to HMRC.
Why was it introduced?
The allowance was introduced as part of the Finance Act 2017 to simplify the tax reporting process for small-scale landlords, making it easier for individuals with minor rental income to comply with tax obligations without needing detailed records of expenses.
For more detailed information, you can visit the HMRC website or consult the guidance on property income allowance directly through their online resources.
