The UK’s personal tax-free allowance can legally be increased to over £21,000 through two HMRC-approved schemes, even as Labour Prime Minister Andy Burnham maintains a freeze on threshold levels in his forthcoming Budget plans. During a recent media visit, Burnham was questioned about potential changes to income tax allowances. He responded cautiously, stating, “Well, it’s funny these days you can’t answer a question honestly without then people reading everything else into it.”
He further emphasised his commitment to transparency, saying, “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.”
Burnham acknowledged the topic had been widely discussed but refrained from making any commitments. “So no commitment, no unfunded promise. 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’. There is no commitment at this point to change, but we will look at that at the budget.”
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Meanwhile, taxpayers can enhance their tax-free income legally by leveraging two schemes: the Rent-a-Room Scheme and the Marriage Tax Allowance.
The Rent-a-Room Scheme allows homeowners and tenants to earn up to £7,500 a year tax-free by renting out furnished accommodation within their primary residence. This effectively raises the personal allowance to approximately £20,070.
Additionally, the Marriage Allowance enables a spouse or civil partner with income below their personal allowance threshold-typically £12,570-to transfer £1,260 of their unused allowance to their partner. This transfer can reduce the recipient’s tax liability by up to £252 annually, resulting in a combined personal allowance of £21,330 for the couple.
Together, these provisions offer a valuable means for many individuals and couples to increase their tax-free earnings, despite the Government’s current stance on freezing personal allowance thresholds.