HMRC cuts Personal Tax Allowance to £11,000 for certain UK households

Most people in the UK get a Personal Allowance of tax-free income under HMRC guidance, which is typically worth over £12,000.

HMRC is cutting UK households' Personal Tax-Free Allowance to £11,000 if they receive a number of perks. Most people in the UK get a Personal Allowance of tax-free income under HMRC guidance, which is typically worth over £12,000.

This is the amount of income you can have before you pay tax. The amount of tax you pay can also be reduced by tax reliefs if you qualify for them.

Two perks could actually see your allowance decreased though: medical insurance, and company cars. You usually pay tax on the cost of the insurance premiums if your employer pays for your medical insurance.

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You’re entitled to the standard tax-free Personal Allowance of £12,570, but you also get medical insurance from your employer. As this is a company benefit it lowers your Personal Allowance and changes your tax code.

The medical insurance benefit of £1,570 is taken away from your personal allowance, leaving you with a tax-free Personal Allowance of £11,000. This would mean your tax code is 1100L.

You pay tax on things like money you earn from employment, profits you make if you’re self-employed, including from services you sell through websites or apps - you can check if you need to tell HMRC about this income and some state benefits.

You pay tax on most pensions, including state pensions, company and personal pensions and retirement annuities, rental income (unless you’re a live-in landlord and get less than the Rent a Room Scheme limit), benefits you get from your job, income from a trust and interest on savings over your savings allowance too.

You do not pay tax on things like the first £1,000 of income from self-employment - this is your ‘trading allowance’, the first £1,000 of income from property you rent (unless you’re using the Rent a Room Scheme) and income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates.

Dividends from company shares under your dividends allowance, some state benefits, premium bond or National Lottery wins and rent you get from a lodger in your house that’s below the Rent a Room Scheme limit is also exempt.

When it comes to cars, if the cars you provide are not exempt, you must report them to HM Revenue and Customs (HMRC), and you may have to pay National Insurance on the value of the benefit.