What is the property income allowance?
Answered 11 March 2026
The Property Income Allowance
What the law says
The property income allowance is a relief available to individuals on income from a relevant property business, contained in Chapter 2 of Part 6A of ITTOIA 2005 (ss. 783B–783BQ).
Amount: The allowance is fixed at £1,000 per tax year. The Treasury has the power to increase this amount by regulations.
How it works — two forms of relief:
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Full relief (s.783BE): If an individual's relevant property income does not exceed £1,000, the income is not charged to income tax at all, and neither the receipts nor any associated expenses are brought into account — unless the individual elects for full relief not to apply.
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Partial relief (s.783BG): If an individual's relevant property income exceeds £1,000, they may elect for an alternative method of calculating profits, in which the £1,000 allowance is used as a deductible amount instead of actual expenses.
Where income comes from two relevant property businesses, the individual may split the £1,000 allowance between them as they choose, provided the deductible amount does not create a loss in either business.
Effect on deductions: Where relief is given, all deductions under Part 3 (property income rules) that relate to the relievable income are disallowed.
Key exclusions — relief is not available where:
- The individual claims a tax reduction under s.274A (mortgage interest relief restriction)
- The income includes rent-a-room receipts in certain circumstances (s.783BM)
- The income includes a payment made by the individual's employer (s.783BN) or by a firm of which the individual is a partner or connected to a partner (s.783BO)
HMRC guidance / practice
HMRC's Property Income Manual confirms the allowance is optional — it may not suit all individuals, for example where a property business is loss-making. An individual who does not wish to use it should elect for full relief not to apply and calculate profits under the normal rules, completing their Self Assessment return in the usual way.
Where an individual qualifies for full relief, they have no obligation to notify HMRC of a new source of income. However, if they cease to be eligible for full relief in a later year, they must notify HMRC of chargeability.
HMRC also confirms that individuals whose relevant income includes income from a connected party are not eligible for the property allowance for that tax year.
Citation sources
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Relief if relevant property income does not exceed property allowance Full relief: introduction 783BE An individual qualifies for full relief for a tax year if— a the individual has relevant property income for the tax year, b the relevant property income does not exceed the individual's property allowance for the tax year, and c no election by the individual under section 783BJ has effect for the
Part 3 Property income Chapter 5 Profits of property businesses: other rules about receipts and deductions Property allowance Property allowance 307G 1 The rules for calculating the profits of an individual's property business are subject to Chapter 2 of Part 6A (property allowance). 2 That Chapter gives relief on relevant property income and, where relief is given, disallows all deductions under this Part which relate to that income (see, in particular, sections 783BC, 783BF and 783BH).
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Relief if relevant property income exceeds property allowance Deductible amount: splitting of property allowance 783BI 1 This section applies where the individual's relevant property income for the tax year consists of the relievable receipts of two relevant property businesses. 2 The references in section 783BH to the deductible amount are to amounts which, in total, equal the individual's proper
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Basic definitions The individual's property allowance 783BD 1 For the purposes of this Chapter, an individual's property allowance for a tax year is £1,000. 2 The Treasury may by regulations amend subsection (1) so as to substitute a higher sum for the sum for the time being specified in that subsection.
S783B - S783BQ Income Tax (Trading and Other Income) Act 2005 (ITTOIA) gives relief to an individual on certain income of a relevant property business (PIM4422) , up to the amount of the property allowance. For the tax year starting 6 April 2017, the property allowance is £1,000. If an individual qualifies for Full Relief the individual’s relevant property income (PIM4426) is not charged to income tax and they have no obligation to notify HMRC if this is a new source of income. If an individual
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Introduction Relief under this Chapter 783B 1 This Chapter gives relief to an individual on certain income of a relevant property business (see sections 783BA and 783BB). 2 The form of relief depends on whether the individual's relevant property income exceeds the individual's property allowance (see sections 783BC and 783BD). 3 If the individual's relevant property income does not exceed the indi
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Relief if relevant property income exceeds property allowance Partial relief: alternative calculation of property profits: introduction 783BG An individual qualifies for partial relief for a tax year if— a the individual has relevant property income for the tax year, b the relevant property income exceeds the individual's property allowance for the tax year, and c an election by the individual und
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Exclusions from relief Exclusion from relief: payments by firm 783BO No relief under this Chapter is given to an individual for a tax year if— a the individual has relevant property income for the tax year, and b the income includes a payment made by, or on behalf of, a firm at a time when the individual is— i a partner in the firm, or ii connected with a partner in the firm.
PART 6A Income charged under this Act: trading and property allowances CHAPTER 2 Property allowance Exclusions from relief Exclusion from relief: tax reduction under section 274A 783BL No relief under this Chapter is given to an individual for a tax year if, in calculating the individual's liability to income tax for the tax year, a tax reduction under section 274A (property business: relief for non-deductible costs of a dwelling-related loan) is applied at Step 6 of the calculation in section 2