Households who have driveways can boost their HMRC tax-free Personal Allowance by another £1,000.
Households who rent out a driveway can boost their tax-free Personal Allowance. (Image: Getty)
New Prime Minister Andy Burnham has been put under pressure to increase the tax-free Personal Allowance in the upcoming Budget this Wednesday – but whatever happens, there is one tax allowance rule drivers can take advantage of.
Despite promising to ‘look at’ the issue, after he admitted in an interview that he had commonly heard the calls for an increase to the Income Tax threshold while out campaigning on doorsteps, Mr Burnham has stopped short of actually promising to raise it.
If nothing changes in the Budget on Wednesday – and most experts do not expect an increase in the allowance, due to the estimated £5bn cost of a £500 increase – then the tax threshold will stay the same until 2031.
That’s why households keen to maximise their tax allowances in the face of the inevitable fiscal drag from frozen thresholds often search for (legal) methods of making more money without paying tax.
HMRC has shared one method drivers can use to boost their standard £12,570 tax-free Personal Allowance to £13,570.
The tax-free property allowance allows a household to rent out their driveway and earn up to £1,000 tax-free each year.
For a household with an unused driveway, or a second space next to their own car on their driveway, the tax allowance could be a handy boost.
HMRC, in its tax guidance, says: “Some people don’t have a spare room but can make some extra money from space they’re not using outside – like a parking space, driveway, or storage area. And the £1,000 tax-free property allowance works for this too. It’s separate to your £1,000 tax-free trading allowance.”
This means you can earn £1,000 a year (£80 a month) from renting out your driveway or a space on your driveway, totally tax-free.
This £1,000 allowance is added to your existing £12,570 tax-free Personal Allowance for a total tax-free allowance of £13,570 a year.
Of course, you can earn more than £1,000 a year from renting out a driveway, but you’ll then pay 20% tax on everything above £1,000, paid at your usual rate of income tax – either 20%, 40% or 45%, depending on how much you earn.
With the personal tax allowance frozen at £12,570, some pensioners are heading towards being caught within the tax net – with the annual new state pension poised to be pushed up to around £13,036 next year.