Got a garage you’re not using? You might be sitting on a small but steady stream of tax-free income.
With many tradespeople and small business owners looking for safe places to store tools and equipment overnight, there’s a growing demand for secure garage space.
The best part? You could earn up to £1,000 a year in rental income — completely tax-free.
Let’s take a look at how it works.
Introducing the Property Allowance
The property allowance is a handy tax break that lets individuals earn up to £1,000 a year from property income without paying any tax — and without even needing to tell HMRC.
It’s designed for small-scale landlords, and yes — that includes people renting out garages, driveways, sheds, or even storage rooms.
A few key things to note:
- You can only claim one property allowance per person (not per property)
- It’s separate from the Rent-a-Room scheme (which applies if you rent out part of your main home)
- It’s also separate from your personal allowance
How It Works in Practice
If your rental income is under £1,000 per year:
- It’s tax-free
- You don’t need to report it to HMRC
- No Self Assessment required — nice and simple!
If your rental income is over £1,000 per year:
You have two options:
- Claim the property allowance and deduct £1,000 from your income
- Deduct your actual allowable expenses
You’ll pay tax on the profit, and you’ll need to report it via Self Assessment.
Top tip: If your actual expenses are less than £1,000, it usually makes sense to claim the allowance instead.
Examples: How the Numbers Work
Example 1 – Trevor’s garage rental
Trevor rents out his unused garage for £100 a month, giving him £1,200 per year in rental income.
His expenses are just £100.
He chooses to claim the £1,000 property allowance, leaving him with a taxable profit of just £200.
Had he claimed his actual expenses instead, his taxable profit would have been £1,100 — a big difference!
Example 2 – Louis and Molly split the income
Louis and Molly rent out their garage for £120 a month, or £1,440 per year.
They split the income equally, receiving £720 each.
Since each of them earns under £1,000, they can both claim the full property allowance and enjoy tax-free income — with no need to notify HMRC.
A Few Things to Keep in Mind
- The property must be in the UK
- You must not already claim the Rent-a-Room scheme on the same income
- If you’re jointly letting the garage, each person can use the allowance separately
- Keep records of what you’ve earned and any expenses in case HMRC asks later
Thinking About Renting Out Your Garage or Driveway?
A few hundred pounds a year can really add up — especially when it’s tax-free! But getting it wrong could mean penalties – or paying more tax than you need to.
Not sure how to report rental income, or whether the property allowance is right for you? We can help.
Get in touch with Jon and the team today, and we’ll make sure you’re maximising your income — and keeping everything above board.
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Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk