Renting out a property: low incomes tax reform group

The income you receive from renting a property is subject to income tax. In terms of rental property income tax, many property owners tend to pay more income tax than they need to pay. This is mostly because they need more knowledge. Real estate investments provide a lot of deductions that can lower the tax for rental income with a proper balance between profits and losses.

When calculating rental property income, there are various deductions in terms of maintenance and ownership charges. While renting out the property, you must be very specific and clear about the rental income. You must provide the same information to HMRC. However, if you do not give the right information, there is a high chance that they will find out about the undisclosed rental income. HMRC will also impose a fine on the rental income that you don’t disclose.

Renting out a property: low incomes tax reform group

What is property income?

Property income refers to the income on buildings and lands, including the rental income from the flat and house. It can also include any part of the flat or house, such as the parking space or room. The property income may also come from other sources like a houseboat, caravan pitch, etc. The property income will not include any income from trade as it is counted under the self-employment income.

Do I have to pay tax on property income?

All types of property incomes will be taxable. However, it may be subjected to allowances and reliefs under specific criteria. If no reliefs and allowances apply to your income, you will have to pay tax on the profit. Therefore, the property income will be classified as allowable expenses. Income is the amount you receive from the tenant as the due rent. If the payment is made in kind, it will also be taxable.

What tax reliefs and allowances will be available for income from property?

Depending on your property income, there will be certain types of allowances and reliefs that you will be eligible for. Here are all the reliefs and incomes that will apply to the property income:

Letting out a room in your home

For the 2022-23 session, the ‘rent-a-room’ relief is applicable for £7,500 from renting out the room within your property.

Property Allowance

The property allowance of £1,000 will be applicable on properties that get income on their property. It can be used for rent-a-room and property allowance for the same property income.

Furnished Holiday Lettings

There will be specific rules on the furnished holiday lettings. These properties will be used only for a short term, mainly on a seasonal basis. Visitors and tourists pay the amount. HMRC provides comprehensive information on taxable income.

How does the property allowance work?

People who rent their properties are eligible to get a property allowance of £1,000. Here are some of the ways through which the property allowance will work:

Full Relief

If the total rental income for 2022-23 is equal to or less than £1,000, HMRC does not require you to declare it. Moreover, you don't even have to pay taxes on it. You will be able to apply it automatically.

Nonetheless, in some instances, you can get taxed on the property income normally. You will not be able to claim any loss or deduction for expenses of the property if you use the full property allowance relief.

Partial Relief

If the total rental income of 2022-23 is more than £1,000, you can choose and calculate the amount of taxable rental profit. It will be applicable for deducting across the property allowance on the rental income. It will be different from the allowable expenses and calculate the taxable rental profits in a specific manner.

What you opt for entirely depends on the expenditure you have. You will be eligible for partial Relief if there are a few expenses. Or else, you could claim actual expenses. You will also be able to claim the actual expenses if you get the rental loss. However, you will not be eligible to claim the deduction and loss for the actual allowable expenses if you choose to use the property allowance.


You can use or not use the property allowance for taxes separately. The election will be applicable each year. If you choose the complete relief, you must file for an election which you don't have to pay by January 31 after the end of the relevant tax year for the second year. If you are going for partial Relief, you must file the election by January 31.

You can file for elections by filing for election on your Self Assessment tax return file. However, for filing the elections, you must click on the relevant boxes while filing the Self Assessment tax return. File the tax return within the usual deadline, as HMRC will only opt for the relevant notification.

Claiming the Expenses

You must not try to pay tax on the payment. Nonetheless, you can work on lowering the assessment bill by guaranteeing a specific portion of the costs, which is tax help. The passable costs refer to the everyday expenses that deal with your occupancy. The passable income will include the following:

  • Landlord insurance
  • Ground rent and service taxes
  • Letting agent and management fees
  • Fees of accountant
  • Cost of advertising of tenants
  • Stationary and phone calls

When it is about ensuring reasonable rent, you must understand how much space the business will require. Make sure to calculate the monthly expenses correctly to file the claims.

What are the allowable expenses?

Allowable expenses are the daily expenditure apart from the capital expenditure. Whether full or partial, make sure to understand the allowable expenses. Some of the allowable expenses to claim to include the following:

  • Cost of renewals and repairs
  • Cost of finding a tenant
  • Cost of insurance
  • Redecorating charges
  • Council tax or water charges


Tax relief on interest and other finances is an essential factor to consider. When renting a property, you must be familiar with the expenses you will be able to claim. Furthermore, make sure to be familiar with the rules of the Low Income Tax reforms group. If you are still getting acquainted with the costs, you can contact a professional accountant to help you with the procedure. The accountants are usually familiar with the UK tax rules, helping you make the right choice in terms of payment.

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