The £1,000 property allowance: when landlords can use it

The property allowance lets you receive up to £1,000 of property income a year without paying tax on it. If your gross property income is more than £1,000, you can deduct a flat £1,000 instead of your real expenses. Landlords with residential mortgages usually cannot use it, because it is blocked in any year you claim the finance cost tax reduction.

What is the property allowance?

The property allowance is a £1,000 tax-free allowance for individuals with income from land or property. It has applied since 6 April 2017 and is set by sections 783B to 783BQ of the Income Tax (Trading and Other Income) Act 2005.

HMRC’s manual at PIM4426 says the allowance applies to your total receipts from all your property businesses for the year. It is measured on gross income, before expenses.

Full relief and partial relief

The allowance works in two ways, depending on your gross property income.

GOV.UK says that if you claim the allowance, “you cannot deduct any other expenses or allowances”. It also cannot create a loss.

Worked examples

These examples use gross rents for 2025-26.

• Rent of £900, costs of £150. Full relief applies. The income is tax-free and you do not need to report it.
• Rent of £1,800, costs of £300. With the allowance, taxable profit is £800. With actual costs it would be £1,500, so the allowance is better.
• Rent of £6,000, costs of £2,500. Actual costs give a profit of £3,500. The allowance would give £5,000, so claim expenses.

You can test your own figures with our rental income tax calculator.

Who cannot use the property allowance?

You cannot use it in a tax year if your property income comes from certain connected sources. GOV.UK lists:

• a company you or a connected person owns or controls
• a partnership where you or a connected person are a partner
• your employer, or your spouse’s or civil partner’s employer

You also cannot use it against income from letting a room in your home under the Rent a Room Scheme. That scheme has its own limit of £7,500 a year, or £3,750 if you share the income with someone else.

Can landlords with a mortgage use it?

Usually not. HMRC’s manual at PIM4460 says: “The property income allowance is not available in a tax year where this reducer is applied.” The reducer is the 20% tax reduction for residential mortgage interest and other finance costs.

That means you choose one or the other. You can claim your expenses plus the finance cost reduction, or claim the allowance. If you choose the allowance, no unused finance costs are carried forward for that year. Our guide to section 24 mortgage interest relief explains the reducer.

Joint owners

Joint owners each get their own £1,000 allowance. GOV.UK says it is set against each person’s share of the gross rental income, so a couple sharing £1,800 of rent equally each have £900 covered in full.

Which applies to you?

Use this checklist before your 2025-26 return.

• If gross rent was £1,000 or less, and none of the exclusions apply, you have full relief.
• If gross rent was over £1,000 and your costs were under £1,000, the allowance is likely to give lower tax.
• If you have a residential mortgage, compare the allowance with expenses plus the 20% reduction. You cannot have both.
• If you made a loss, claim actual expenses so the loss can be carried forward.
• If you let a room in your own home, use Rent a Room relief instead.

How to claim it

You claim partial relief on your tax return. On the SA105 UK property pages, enter gross rents in box 20 and the allowance in box 20.1, and leave the expense boxes blank.

HMRC’s PIM4440 says elections are made through the return. The time limit is the first anniversary of 31 January after the tax year, so for 2025-26 that is 31 January 2028.

Under GOV.UK’s rules, gross property income between £1,000 and £2,500 means contacting HMRC, and over £2,500 means registering for Self Assessment. See Self Assessment thresholds.

Did Budget 2026 change the property allowance?

No. Budget 2026 on 28 October 2026 raised the trading allowance from £1,000 to £3,000 from the 2027-28 tax year. HMRC’s policy paper covers only trading and miscellaneous income and does not mention property. Read more in trading allowance triples to £3,000.

Frequently asked questions

How much is the property allowance for 2025-26?

It is £1,000 for the tax year. It has been £1,000 since it was introduced on 6 April 2017.

Do I need to tell HMRC about rent under £1,000?

Usually not. If your gross property income was £1,000 or less and full relief applies, you do not need to declare it, but you must keep records.

Can I claim the property allowance and mortgage interest?

No. HMRC’s manual says the allowance is not available in a year when the residential finance cost reduction is applied.

Do joint owners share one £1,000 allowance?

No. Each joint owner gets their own £1,000 allowance against their share of the gross rent.

Is the property allowance rising to £3,000?

No. Budget 2026 raised the trading allowance to £3,000 from April 2027. The property allowance is unchanged at £1,000.