Many people have unused space that could generate extra income. But before you start renting out your garage or driveway, you need to understand the tax implications. In this episode of the I Hate Numbers podcast, we explain how to keep it legal and tax-efficient while boosting your earnings.
What You’ll Learn in This Episode
- The UK tax rules for renting out garages, driveways, and storage spaces.
- How much income you can earn tax-free under the property allowance.
- What records to keep and when you need to declare the income.
- Practical tips for staying compliant and avoiding HMRC problems.
How Tax-Free Income Works
If you rent out your garage, driveway, or storage space, HMRC treats this as property income. But the good news is that you can earn up to £1,000 tax-free under the property allowance. If your income stays within that limit, there’s nothing to report. Go over it, and you’ll need to declare it on your self-assessment tax return.
Property Allowance Explained
- £1,000 property allowance applies to rental income, including garage and driveway rentals.
- No need to register or report income if you stay under £1,000.
- If you earn more, you can deduct either actual expenses or the £1,000 allowance.
What Counts as Rental Income?
Renting your driveway to a commuter or your garage for storage counts as taxable property income. Even if it’s casual or occasional, HMRC expects you to declare it if it exceeds the allowance. Payments from family members for genuine rent also count.
When to Tell HMRC
If your total income from this activity is over £1,000 in the tax year, you need to inform HMRC and include it on your tax return. Failure to do so can lead to penalties, so track what you earn.
Keeping Records
- Track all payments received.
- Keep agreements, even informal ones, in writing.
- Record any related expenses if you plan to claim them.
Final Thoughts
Renting out unused space can be a smart way to boost your income, but don’t fall into the trap of ignoring tax rules. Use the property allowance wisely, keep good records, and stay compliant. It’s simple once you know the basics.
Links Mentioned in This Episode
Episode Timecodes
- [00:00:00] – Intro: Earning from unused space
- [00:01:12] – How the property allowance works
- [00:02:34] – What counts as rental income
- [00:04:15] – Reporting requirements
- [00:05:20] – Record keeping tips
- [00:06:10] – Final takeaways
🎧 Listen & Subscribe to I Hate Numbers
Earn extra income without the tax stress. Listen on Apple Podcasts, share this episode, and subscribe for weekly tax and business tips. Plan it. Do it. Profit.
Additional Links
Transcript
Welcome to the I Hate Numbers podcast. This is the show that helps you make money, save tax, and reduce your stress. What's not to like? Well, today is a topic about making some extra cash for yourself. It's where you can turn your empty garage or garage if you prefer, into a stream of income. And yes, it may even be tax-free.
::Now, do you have a garage that's gathering dust? Well, you are not on your own. Many thousands of households in the United Kingdom have unused garage space. The cars left on the drive. It might just have the odds and bits of tools in there, but they're largely unused. Now, what if I told you that that space could help pay your bills, give you some money towards a holiday,
::an indulgence or a treat? That's right. You can actually rent out your garage and earn money and all possibly tax-free. Let's break it down more. Now, first of all, why is there this demand? Well, people, businesses need safe storage. Tradespeople need to store tools. Locals need space for their bikes or furniture.
::good news. You can earn up to:::the rent that you charge out,:::You can either deduct that:::That's:::It's a simple choice and one that will save Anna some tax. Now let's throw you in another scenario. James and Hannah rent out their garage for 120 pounds a month. Grab the old calculator. That's 1,440 pounds per annum. Now because it's jointly owned, they split the income. Each is entitled to 720 pounds each.
::w, both of them are under the:::Tax is not the only consideration. We need to talk safety. We need to talk insurance, and we need to talk legality as well. Let's deal with the insurance. Now, before you rent your garage out, speak to your insurance company. Now, many home insurance policies will exclude rental use. You might need extra cover, and this protects against theft, damage, or accidents.
::Also, your tenant will need their own insurance. Their stuff may not be and not normally covered by your insurance. Now for the security bit - a secure garage means happy renters and it also gives you peace of mind. It can also command a higher rent. Maybe add a sturdy lock, a security camera. Those ring doorbells are pretty fancy stuff.
::Motion sensitive lights, keep the space clean and dry. Whatever you do, make sure you've got some degree of a security system. That's trust and it builds up value. Now, legality wise, what you need to do is always, and I'm emphasising the word always, have a written agreement between you and your client. Don't rely just on handshakes.
::Make sure that agreement covers things like the rent, the dates, the access times (you don't want them accessing your garage when you are fast asleep), rules and the notice period, and this protects both sides. The important question is how do you find good tenants? Well, where possible, avoid the dodgy classifieds.
::Use trusted platforms. Ask local businesses. Tap into your network. Use your local Facebook groups, but be careful. Meet the renters in person. Obviously, your gut and your instinct has a lot to play here, but use and operate due diligence. Now, pricing matters. Look around your area, garages in cities or near transport links fetch more.
::If your garage is large and it's secure, you could charge more. Don't undervalue your space. Just because it's a garage, it doesn't mean you should undervalue it. Now, keep an eye on your earnings, track them, and if you earn under a thousand pounds by way of sales, then there's no tax to pay. A simple spreadsheet should be good enough.
::l expenses. And remember, the:::keep records, keep it clean, and treat it as though it's a mini business. Make sure you screen tenants, make sure you exercise due diligence and be flexible with your terms. And also check if you need permissions. If you are subletting your garage, and you don't happen to own the property, check if permission is needed.
::Now, most councils don't require planning for garage lets, but just check with the local authority what their planning regulations will say. If you rent your property via a leasehold, read the lease. Some will restrict subletting. So the question is, is it worth it? Absolutely. You earn extra income, you help somebody out,
::don't lose sight of that, and you make use of a new space. The folks, I hope you found this episode useful. I hope you found it as some value. I'd love it if you could share with those who you feel would benefit, and hey, subscribe. Let me get that news out to more people. Your reviews, your comments are really helpful.
::Now, if you need more help on this, you know what to do, either speak to your accountant or (cough, cough) book a review with us at I Hate Numbers. We'll help you understand your options, use those allowances wisely, and make sure you stay on the right side of HMRC. And until next time, take care of yourself and your numbers.
::Plan it, do it, and profit.