Households with an unused driveway or a spare space can increase their HMRC tax-free Personal Allowance from £12,570 to £13,570 by renting out that space, earning up to £1,000 a year tax-free.
The tax-free property allowance lets a household rent out a driveway and earn up to £1,000 each year without paying tax. This sits alongside the standard £12,570 Personal Allowance, bringing the total tax-free amount to £13,570 annually.
How the Property Allowance Works
HMRC guidance explains that people without a spare room can still make extra money from space they are not using outside, such as a parking space, driveway, or storage area. The £1,000 tax-free property allowance applies to this income and is separate from the £1,000 tax-free trading allowance.
For a household with an unused driveway, or a second space next to their own car, the allowance could provide a boost. This means earning £1,000 a year (£80 a month) from renting out a driveway or a space on it, entirely tax-free.
Tax on Earnings Above £1,000
Anyone earning more than £1,000 a year from renting out a driveway will pay 20% tax on everything above that amount, at their usual income tax rate of 20%, 40%, or 45%, depending on earnings.
The reminder comes as new Prime Minister Andy Burnham faces pressure to increase the Personal Allowance in the upcoming Budget, though he has stopped short of promising a rise. If the threshold remains unchanged, it will stay at £12,570 until 2031. With the allowance frozen, some pensioners face being drawn into the tax net, as the annual new state pension is set to rise to around £13,036 next year.
