It’s all about location, location, location, so if you have a driveway or piece of land in a prime spot, you could earn some tax-free income by renting it out.
If you live in a city centre or near a railway station, airport, concert or sporting venue, you could earn up to £1,000 tax free per year renting out your driveway or a parking space on your property before having to report it to HMRC or pay tax on it.
Do I need planning permission?
Although there has been some debate in local councils on whether planning permission is needed for parking space rentals, the government (who has the final say) encourages it in its guidance.
“There is a public interest from such renting, by providing more cheap and flexible parking spaces for people to park their car and taking pressure away from on-street parking.”https://www.gov.uk/guidance/when-is-permission-required
What if I earn over £1,000?
If you earn over £1,000, you can either deduct the allowance and pay tax on the excess, or work out your profit and loss and deduct the expenses from your income. If your expenses are more than £1,000, it would usually be better to work out your profits. Here’s an example:
Gareth lives near a football ground and provides parking in his paddock on match days. He earns £3,750 from parking receipts and incurs expenses of £800. If he calculates his profit in the usual way, his taxable profit would be £2,950 (£3,750 – £800). If he claims property income allowance, his taxable profit would be £2,750 (£3,750 – £1,000). Therefore claiming the allowance is preferable, to minimise the tax payable on his profits.
If you’re renting out your driveway on an occasional basis, it’s unlikely you’ll exceed the tax free £1,000. Therefore, any income under this figure would be a tidy tax free sum in your pocket.
You should consult an expert before making any financial decisions. Speak to one of our experts on 0161 476 9000 or contact us here.