‘Backdating’ Families can Get A Rise in their HMRC Tax-Free Personal Allowance to £14,064
The tax-free Personal Allowance has been stagnant for many years and is expected to stay that way until at least 2028. Except for a sudden change in government policy, the tax-free Personal Allowance has been frozen for several years and is likely to stay that way until at least 2028. Therefore, when wages grow to keep up with inflation and more people earn income subject to income tax, ‘fiscal drag’ will cause more people to pay more tax on their earnings.
The amount you may earn before you begin paying taxes is known as the Personal Allowance, and it is presently fixed at £12,570, where it is anticipated to remain until 2028 at the latest. As a result, any income beyond this amount is subject to 20% tax, 40% tax for higher rate taxpayers, and 45% tax for extra rate taxpayers.
One way to increase your tax-free Personal Allowance is to be married or in a civil partnership. The tax-free income of married couples or those in a civil partnership might be increased by £252. If the claim is backdated, it can be used for up to four different tax years, possibly yielding a £1,242 tax refund. This amounts to £14,064 tax-free, instead of £12,570, when added to the annual statutory Personal Allowance.
One couple must earn less than £12,570 to be eligible, meaning they must not pay income tax. According to the Express, this may be the case if one partner is not working, has lost their job, or is taking a professional hiatus for childcare-related reasons.
The other partner must earn between £12,570 and £50,270 (after subtracting pension payments) and be a basic rate taxpayer. Through the Marriage Allowance process, the lower-earning partner can give their spouse £1,260 of their Allowance, which lowers their tax liability by £252 for each year it is claimed (20% of £1,260).
Although wages within those limits remain taxed, a small change was made for the 2024–25 tax year, allowing someone earning between £11,130 and £12,570 to transfer their Allowance. Though not as much as for individuals making less than £11,130, it nevertheless leads to savings.
