Earn tax-free income from renting out your garage

There is demand for garage space, especially from tradespeople who need secure storage. If you have an unused garage, you could rent it out and potentially earn up to £1,000 a year tax-free through the property allowance.

The property allowance allows landlords to earn £1,000 rental income a year tax-free (in addition to any Rent-a-Room scheme allowance). Each individual can only claim one property allowance, regardless of the number of lettings. It is separate from the personal allowance and, if relevant, the trading allowance.

• If annual rental income is less than £1,000, it is tax-free and doesn’t need to be reported to HMRC.

• If it exceeds £1,000, landlords can either:

  1. Deduct allowable expenses from rental income, or

  2. Deduct the £1,000 property allowance instead – useful if expenses are below £1,000.
     The taxable profit must be reported via Self Assessment.

Example 1: Lucy rents her garage for £1,200/year with £100 expenses. Using the property allowance, her taxable profit is £200 instead of £1,100.
Example 2: James and Hannah rent their garage for £1,440/year (£720 each). As each amount is below £1,000, the income is tax-free and doesn’t need to be reported.