Property Income Allowance
Quick answer
A £1,000 tax-free allowance for gross property income. If your total rental income in a tax year is £1,000 or less you usually do not need to declare it. If it is more, you can either deduct the £1,000 allowance instead of your actual expenses, or claim actual expenses — whichever gives the lower tax — but not both.
At a glance
- Allowance
- £1,000 gross property income
- Rule
- Allowance OR actual expenses, not both
Full guide
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Open full guideWhy Property Income Allowance matters for landlords
The property income allowance mainly helps very small or occasional landlords — a single room let casually, or a short period of letting — who would otherwise face paperwork for a trivial sum. For a normal buy-to-let with real costs (agent fees, insurance, repairs) the actual-expenses route almost always beats the flat £1,000, so the allowance is rarely the better choice once a property is genuinely being run as a letting. It is separate from, and cannot be stacked with, the Rent a Room scheme on the same income.
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Official sources
LetCompliance editorial reviews this entry every quarter against the sources above. Always confirm specific duties with a qualified solicitor or your local council.
Related terms
BTL (Buy-to-Let)
A mortgage product and business model where a property is purchased specifically to rent out. Buy-to-let landlords are subject to Section 24 of the Finance Act 2015, which replaced mortgage interest relief with a 20% tax credit. Stamp duty is higher on a second property.
Capital Allowances
Tax relief for capital spending on qualifying "plant and machinery". For a standard residential letting they are generally NOT available — furniture and appliances are covered instead by Replacement of Domestic Items Relief. Capital allowances mainly apply to equipment in the communal areas of some HMOs and to commercial property; the furnished holiday let regime that allowed them was abolished from April 2025.
Capital Gains Tax (CGT)
Tax on the profit from selling a rental property. From April 2024 the CGT annual exempt amount was reduced to £3,000 and residential property gains are taxed at 18% (basic rate) or 24% (higher rate). A CGT return must be filed and tax paid within 60 days of completion.
Furnished Holiday Let (FHL)
A short-let property meeting the FHL availability and letting tests (210 days available, 105 days actually let, etc.). Treated as a trade for tax purposes until 5 April 2025, with full mortgage interest deduction, capital allowances on furniture and fittings, and Business Asset Disposal Relief on sale. From 6 April 2025 the FHL regime was abolished by the Finance Act 2024: existing FHLs fall under standard property income rules and Section 24 mortgage interest restriction applies in full.
Inheritance Tax (IHT)
A tax on the value of an estate on death, charged at 40% above the tax-free threshold. Rental property counts in the estate at its market value less any outstanding mortgage. The nil-rate band is £325,000, with a further residence nil-rate band potentially available when a main home passes to direct descendants.
Mortgage Interest Tax Credit (Section 24)
The 20% basic-rate tax credit that replaced full mortgage interest deduction for individual UK landlords under section 24 of the Finance (No.2) Act 2015. From 6 April 2020, finance costs (mortgage interest, loan interest, mortgage broker fees) are no longer deductible from rental profits; instead HMRC gives a tax reducer at the basic rate, capped at the lower of finance costs, property profits or adjusted total income after personal allowance. Higher- and additional-rate taxpayers are materially worse off than pre-2017; Limited Company landlords are unaffected because Ltd interest remains a fully deductible business expense.