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HMRC property income allowance

The HMRC property income allowance is a flat £1,000 tax-free allowance that you can use against your rental income. You can’t claim it in conjunction with any other rental income allowances (e.g. the Rent-a-Room scheme) so you should consider whether it’s the most tax-efficient relief you can claim. 

Who is eligible?

You can claim the property income allowance if:

  • You’re a live in landlord
  • You rent out property that you don’t live in
  • Your expenses are less than £1,000 per year
  • You rent out property via Airbnb
  • You’re not claiming other tax reliefs on your rental income
  • You own a property jointly with someone else – you can both claim £1,000 per year

Be aware that if your annual rental income is less than £1,000, you don’t have to declare this to HMRC, nor do a tax return. 

When was the HMRC property income allowance introduced?

The allowance was introduced in 2017, along with the Trading Allowance. Since then, the benefits to being a buy-to-let landlord are seen by many as dwindling. Here’s why:

  • No more tax relief on mortgage interest
  • 3% stamp duty surcharge for landlords
  • The tenant fee ban – meaning that rental admin charges have to be paid by the landlord

It’s probably more useful to look at the financial impact. The below table shows the comparison between your taxable income back in 2016 vs. today. 

2016 Today
Annual rental income £12,000 £12,000
Annual mortgage interest £3,600 £3,600
Claimable mortgage interest £3,600 £0 (but instead you get a 20% tax credit worth £720)
Taxable annual income £8,400 £12,000
Basic rate tax bill £1,680 £1,680
Higher rate tax bill £3,360 £4,080

Should I claim the allowance?

We’ve written a more in-depth guide to help you decide. Take a look here to work out whether or not the property income allowance is for you. 

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