Tax on rental income: £1,000 property allowance and when to tell HMRC

The first £1,000 of rental income each tax year is tax-free. Above that, you must tell HMRC, and above £2,500 after expenses or £10,000 before expenses you report it on a Self Assessment tax return.

Deadline

No fixed deadline

Last checked

Checked against the official source: 21 October 2026

What if you miss the deadline? If you do not usually send a tax return, register by 5 October after the tax year in which you had rental income. Late registration and late returns can lead to penalties.

If you let out a property, you pay Income Tax on your rental profit. The first £1,000 of property income is tax-free (the property allowance). You can deduct allowable running costs, but not improvements or the cost of buying the property.

How to do it

1. Add up your rental income for the tax year (6 April to 5 April).
2. List allowable expenses: letting agent and accountant fees, insurance, bills you pay, Council Tax, repairs and maintenance (not improvements).
3. Between £1,000 and £2,500, contact HMRC. Above £2,500 after expenses or £10,000 before expenses, register for Self Assessment by 5 October.
4. Report your rental income on your tax return and pay by 31 January.
5. If your property and self-employment income is high, check the Making Tax Digital thresholds.

Common questions

Is the first £1,000 of rent tax-free?

Yes. The property allowance covers the first £1,000 of property income each tax year. Joint owners can each use £1,000 against their share.

Can I deduct my mortgage interest as an expense?

Not as an expense. Instead, you get a tax reduction of 20% of your mortgage interest and other finance costs. Claim it on your Self Assessment tax return. Only companies paying Corporation Tax deduct loan interest as an expense.

Can I use the property allowance for a lodger in my home?

No. Renting a room in your own home falls under the separate Rent a Room Scheme.

Official source: gov.uk (opens in a new tab)

This information is not legal or tax advice.