Households could increase the amount of income they receive tax-free to as much as £21,330 by using two lesser-known HM Revenue and Customs (HMRC) rules. The Personal Allowance remains frozen at £12,570 and is set to stay at that level until at least 2031, meaning it will have remained unchanged for a decade.
Personal Allowance frozen at £12,570
Everyone, including students, has a Personal Allowance. This is the amount of money you are allowed to earn each tax year before you start paying Income Tax. For the 2025/26 tax year, the Personal Allowance is £12,570. If you earn less than this, you usually will not have to pay any Income Tax.
Marriage Allowance boosts tax-free income
Marriage Allowance is available to married couples and civil partners where one partner earns less than the Personal Allowance and the other pays income tax at the basic rate. Under the scheme, the lower-earning partner can transfer £1,260 of their Personal Allowance to their spouse or civil partner, increasing the recipient's tax-free allowance to £13,830. The tax saving is worth up to £252 a year for eligible couples, and claims can be backdated for up to four tax years if the eligibility criteria were met during that period.
Labour Party government tax arm HMRC states: "Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner."
Rent-a-Room scheme adds further relief
The Rent-a-Room scheme offers another tax relief for homeowners who let furnished accommodation in the home they live in. Under the scheme, eligible homeowners can receive up to £7,500 a year in rental income without paying tax on that income. Those who need to complete a self-assessment tax return must declare the rental income, but provided it does not exceed the £7,500 threshold, the income remains exempt from tax.
Combined potential tax-free income
When combined, the two HMRC schemes could allow some eligible pensioners to receive up to £21,330 tax-free. This figure is reached by adding the £12,570 Personal Allowance, the £1,260 Marriage Allowance transfer, and the £7,500 Rent-a-Room relief. However, the Rent-a-Room scheme applies only to rental income, not general earnings, so the total tax-free amount may vary depending on individual circumstances.
