Two legal HMRC rules can boost a person's tax-free allowance to over £21,000, even as Prime Minister Andy Burnham plays down any immediate change to frozen thresholds. The Rent-a-Room Scheme and Marriage Allowance together can raise the effective personal allowance to £21,330 for eligible couples, according to official HMRC guidance.
PM's stance on personal allowance
Mr Burnham, the Labour Party Prime Minister, has dismissed speculation that his government will increase the tax-free personal allowance in the next Budget. Asked by broadcasters during a visit whether he planned to change the income tax allowance, he said: "Well, it's funny these days you can't answer a question honestly without then people reading everything else into it."
He added: "I want to answer questions honestly in this job, as I said before. I think that's all about trust in politics and doing politics differently, and I'm determined to keep working in that way. It was raised a lot, but I then went on to say, 'But we'll have to look at it at the budget alongside everything else'. So no commitment, no unfunded promise. It's just perhaps the way politics is these days and the way people report things, but that was an honest answer. There is no commitment at this point to change, but we will look at that at the budget."
How to legally increase your allowance
Despite the freeze, two HMRC-approved methods can increase your tax-free threshold. The Rent-a-Room Scheme allows owner occupiers and tenants to receive tax-free rental income if they provide furnished accommodation in their only or main home. The annual Rent-a-Room limit is £7,500.
Adding this to the standard Personal Allowance of £12,570 brings the total to £20,070. Additionally, Marriage Allowance lets you transfer £1,260 of your allowance to your husband, wife or civil partner. This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year), and combined, it means a £21,330 allowance for the couple.
Eligibility for the boost
To benefit as a couple, the lower earner must normally have an income below their Personal Allowance, which is usually £12,570. This legal route offers a way to mitigate the frozen thresholds without relying on government action.
