How do the property allowance and rent-a-room relief work?
The property allowance makes the first £1,000 of gross property income tax free, or lets you deduct £1,000 instead of actual expenses. Rent-a-room relief makes up to £7,500 a year tax free when you let furnished rooms in your own home to a lodger. Both suit small amounts of income rather than a rental portfolio.
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The two reliefs compared
| Point | Property allowance / Rent-a-room |
|---|---|
| Amount | £1,000 a year / £7,500 a year (£3,750 if shared) |
| Applies to | Any property income / furnished rooms in your main home |
| If income is under the limit | No need to declare / no need to declare |
| If income is over | Deduct the allowance instead of expenses / deduct the limit instead of expenses |
| Joint owners | £1,000 each / limit shared between those receiving it |
The property allowance
If your gross property income is £1,000 or less, you do not need to report or pay tax on it. If it is more, you can choose to deduct £1,000 instead of your actual expenses. That only helps where real costs are very low, such as occasional parking space or garage rental. It cannot be used on income from a company you or a connected person control, or together with rent-a-room relief on the same income.
Rent-a-room relief
Rent-a-room covers furnished accommodation in the home you live in, for example a lodger in a spare room. Income up to £7,500 is tax free; the limit is halved if someone else, such as a partner, also receives income from letting rooms in the same home. A lodger usually shares your living space and is not an assured tenant, so the Renters' Rights Act tenancy rules do not apply in the same way.
Why portfolio landlords rarely use them
For a buy-to-let business, actual allowable expenses almost always exceed £1,000, so claiming them is better. Rent-a-room does not apply to whole properties let to tenants. The reliefs mainly matter for landlords winding down: someone who sells their portfolio but keeps a lodger, or rents out a driveway, can often stop filing property income altogether.
Official Sources and Further Reading
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
The property allowance makes the first £1,000 of gross property income tax free, or lets you deduct £1,000 instead of actual expenses. Rent-a-room relief makes up to £7,500 a year tax free when you let furnished rooms in your own home to a lodger. Both suit small amounts of income rather than a rental portfolio.
Yes, if it is furnished accommodation in your main residence, subject to the £7,500 limit.
Letting a room to a lodger who shares your home does not normally restrict private residence relief.
If income is under £1,000 it applies automatically. Above that, you choose it on your tax return.
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