Turn Your Garage Into Tax-Free Cash

:: 00:00

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.

:: 00:23

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,

:: 00:44

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.

:: 01:07

And by renting out your garage space, you meet this need and you also earn cash into the bargain. Now, here's the good news. You can earn up to 1000 pounds tax free using something called the Property Allowance. Now, you may be scratching your head and thinking, what's that, Mahmood? Well, I'm glad you asked.

:: 01:25

The Property Allowance is a tax-free allowance that covers small amounts of property income. That includes garages, driveways, even small plots of land. If you earn, and that's the rent that you charge out, 1000 pounds or less, no tax, no reporting – it’s clean and simple. Now, if you generate more than 1000 pounds by way of rental income on your garage, then you still have got options.

:: 01:51

You can either deduct that 1000 pound as a flat-rate allowance. The difference is the profit on which you will be subject to tax, or you can take off the actual expenses in connection with renting that garage space. It reduces your rental profits and thereby reduces your tax burden as well. Now, let's imagine Anna rents out her garage for 100 pounds a month.

:: 02:13

That's 1200 pounds a year. Now, she identifies, she only spends a hundred pound a year, maintaining that. Now she could, if she wanted to deduct the actual expense and pay tax on 1100 pounds, or alternatively, she could just deduct the 1000 pound property allowance and be taxed on 200 pounds. Probably not much of a dilemma there.

:: 02:34

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.

:: 02:55

Now, both of them are under the 1000 pound allowance, and that's 1000 pounds per person, by the way. All of it is tax-free. You can quite easily, quite comfortably, not tell HMRC and there's no looking over your shoulder for that knock on the door or the letter coming through the letter box. Now, income isn't the only thing that you need to take into account.

:: 03:15

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.

:: 03:37

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.

:: 03:59

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.

:: 04:19

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.

:: 04:37

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.

:: 05:01

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.

:: 05:19

Now, if you go over that, make sure you enter the system, report it via self-assessment. You can use that property allowance that I mentioned earlier or actual expenses. And remember, the 1000 pounds is for each person, not per garage. Do you fancy some more tips? Well carry on listening, and I'm going share some more with you. Now,

:: 05:39

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.

:: 05:57

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,

:: 06:17

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.

:: 06:33

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.

:: 06:50

Plan it, do it, and profit.