The Property Tax Allowance Explained
Thanks to the government’s property tax allowance, if you can get someone to rent a space in your home (which is easy enough to do with Stashbee), you could earn up to £1,000 tax-free every year. This applies to storage space, or even when you rent out a parking space in your driveway.
What is the Property Income Allowance in the UK?
Imagine a reality show called “Rent My Garage UK”, where the hosts help people clear out their garages so they can rent them out and earn tax-free income. It would be a good way to get the message about tax-free allowances on property out there. While we wait for the BBC to give the pilot episode the green light (call us, you guys!), we’ll try to explain how it works.
When the new tax year kicked off on 6 April 2017, the UK government started considering anything up to the first £1,000 in earnings from property and trading income to be tax exempt.
What this means is that you as an individual can now earn up to a thousand pounds of gross income (from a single source) over the tax year, without having to declare it to HMRC. By gross income, we’re talking about the total amount you would put on your tax return before allowances and expenses have been removed.
Exclusions to keep in mind
That said, there are a couple of conditions you should know about for when you do your planning, where the allowance doesn’t apply:
- You can’t use it for property income from a company you, or someone connected to you owns or runs. The same applies to a business partnership in which you, or someone connected to you, are partners. The allowance also doesn’t apply for property income from your own employer, or the employer of your spouse or civil partner.
- The tax-free allowance isn’t valid for income earned from letting out a roomi in your home instead of taking part in the "Rent a Room” scheme. All the more reason to stick to storage and parking rentals, yes?
- Lastly, you can’t use the property allowance if you are already planning on claiming the tax reducer for finance costs related to the property (like mortgage interest, for instance).
The allowance caters primarily to individual property owners who make a single income of up to £1,000 from their property over the course of a year. Joint owners of a property are still eligible for the allowance against their individual share of the gross rental income, but they should make sure that they don’t fall into any of the exclusions we’ve mentioned.
Earn Up to £1,000 Tax-Free with Stashbee
There are so many great passive income ideas out there, but earning tax-free money through the property tax allowance is one of the easiest ways to do so.
If you’ve read the exclusions list and are planning on earning just a single income from your property, renting out storage or parking space could be the way to go.
Stashbee simplifies the process by giving you an estimate of what you can expect to earn every month from a storage or parking rental, no matter where you live. All you need to do is enter the storage type, estimated size and your postcode into our online calculator. In a matter of seconds, you’ll have the average price of all the listings (not just the market average) right in front of you.
From there, creating your actual listing takes just a couple of minutes. Once approved by the Stashbee team, you manage requests directly from the comfort of your own home. There are no hidden fees for potential renters to worry about, and insurance is covered for all storage clients. Talk about encouraging a hassle-free experience for both parties!
Making Tax-Free Earnings Work For You
If you’re a homeowner, the property tax allowance has made the prospect of earning tax-free income easier than ever.
Just imagine the extra money you can put back into your pocket each year, that could be reinvested elsewhere (like in an ISA, with even more tax-free returns). If these savings compounded over time, you could end up with a surprising nest egg a little later down the line.
The allowance could also just help to put a few extra quid in your pocket for that broken appliance you want to replace, or that new motorbike you’ve had your eye on.
Regardless, it’s never been more appealing to rent out a storage or parking space from your beloved home.
10th Feb 2021