HMRC alert as households urged to claim up to £16k tax-free with five little-known tricks

With more UK households being pulled into higher tax brackets due to frozen thresholds, millions are missing out on legitimate ways to keep more of their money. Britons are urged to take advantage of five underused tax breaks that could boost household income by over £16,000 tax-free, with no need for specialist advice or high earnings.

Laura Suter, director of personal finance at AJ Bell, said: "These five simple tax tips don't require you to have a six-figure salary or a team of advisers on speed dial. They're well within reach for the average household and are fully sanctioned by HMRC, so there's no need to feel like you're gaming the system. In fact, these allowances and exemptions are designed to help people make the most of their money."

Marriage Allowance (£1,260)

Couples where one partner earns below £12,570 can transfer their unused personal allowance to their spouse, saving up to £252 per year. Around two million eligible couples, including many pensioners, aren't claiming this benefit.

Ms Suter said: "What's even better is that you can backdate any claims for up to four years, assuming you were eligible in those years, which would get you a total of £1,260, including the current year's claim."

Trading Allowance (£1,000)

Individuals can earn up to £1,000 tax-free from side jobs or self-employment, such as online selling or dog-walking, without needing to file a tax return if their income stays below the threshold.

Ms Suter said: "If you earn more than £1,000 from your side hustle in a tax year, you'll still benefit from the tax break, but you'll need to fill out a tax return to declare the extra income and pay any relevant tax."

She added: "Just make sure you keep track of any relevant paperwork proving your income."

Rent-a-Room Scheme (£7,500)

Homeowners can earn up to £7,500 tax-free by letting out furnished rooms in their main residence. This applies whether renting a single room or offering a bed and breakfast, as long as the landlord lives in the property.

Ms Suter said: "You don't have to let the room for a minimum period of time. But be aware that if you own the property jointly with someone and split the income, you only get half the relief per person."

Tax-Free Childcare (£2,000 per child)

Working parents can claim a 20% subsidy on childcare costs, worth up to £2,000 per child each year (or £4,000 per year if your child is disabled). The scheme is paid quarterly and can be used alongside 30 hours of free childcare for eligible families. It covers children up to age 11, or 16 if disabled.

£5,000 Tax-Free Savings Allowance

Those earning £12,570 or less can receive up to £5,000 in savings interest tax-free. Even those earning up to £17,570 can benefit, though the allowance tapers off above £12,570. At current savings rates, this could mean holding up to £100,000 without incurring tax on the interest.

Ms Suter said: "This trick is particularly handy for couples where one has a low income, but as a household, they have a decent amount in savings. If you transfer the bulk of the savings to the lower-earning half of the couple, you can maximise the tax-free limit."

Experts recommend reviewing household finances to check if you can benefit from these allowances. However, be cautious when claiming anything online. Only use the official Government portal to avoid scam websites posing as HMRC.