HMRC Announces Significant Increase in Tax-Free Personal Allowance
The HM Revenue and Customs (HMRC) has implemented a notable hike in the Tax-Free Personal Allowance, raising it to £13,830 for specific households with earnings below £50,270. This adjustment represents an increase of £1,250 from the previous threshold, offering substantial financial relief to eligible taxpayers across the United Kingdom.
Understanding the Marriage Allowance Benefit
Central to this change is the Marriage Allowance, a valuable tax perk designed for married couples or those in civil partnerships. This provision allows one partner to transfer £1,260 of their personal allowance to their higher-earning spouse. To qualify, one partner must be a non-taxpayer, meaning they earn less than the standard personal allowance of £12,570, while the other partner must be a basic-rate taxpayer earning under £50,270.
The transfer effectively augments the higher earner's personal allowance, leading to potential tax savings. For the 2025-26 tax year, eligible couples can save up to £252 in taxes. Additionally, claims can be backdated for up to four previous tax years, provided the eligibility criteria were met during those periods.
Expert Insights and Important Distinctions
Martin Lewis, the founder of Money Saving Expert and a prominent BBC and ITV financial commentator, has clarified key aspects of the Marriage Tax Allowance. He emphasized that while the allowance reduces the tax liability of the higher-earning partner, it does not alter the threshold for higher-rate tax or increase their personal allowance directly.
This distinction is crucial, as it means individuals earning slightly above £50,270 cannot qualify by attempting to bring their income within the basic rate band through the allowance transfer. Lewis stated, "Marriage Tax Allowance has the effect of reducing the amount of tax your spouse or civil partner needs to pay. However, technically this transfer doesn't increase the threshold at which they'd need to start paying higher rate tax, nor does it increase their own amount of personal allowance."
Additional Allowances and Eligibility Criteria
Beyond the Marriage Allowance, there is also the Married Couple's Allowance (MCA), which permits a reduction in the tax bill by up to 10%. However, this benefit is restricted to couples where one or both partners were born before April 5, 1935, making it applicable primarily to older generations.
The overall impact of these allowances effectively elevates the tax-free threshold for qualifying UK households to £13,830, providing a significant boost to household finances. This move is part of broader efforts to support families and optimize tax efficiency within the current economic framework.
