HM Revenue and Customs (HMRC) has issued a reminder to taxpayers about the £1,047.50 tax-free allowance that applies in 2025. Many people across the UK may not be fully aware of how this allowance works or whether they are entitled to claim it. With living costs still high and households looking for every possible way to save money, understanding this tax-free allowance could make a real difference to your finances.
This reminder from HMRC is timely, as millions of taxpayers may be overlooking benefits they are already entitled to. Whether you are employed, self-employed, or earning additional income through savings and investments, knowing how the allowance works can help you plan your finances more effectively.
What is the £1,047.50 Tax-Free Allowance
The £1,047.50 allowance refers to the amount of income you can earn tax-free in specific circumstances. It is separate from the standard personal allowance of £12,570, which most UK taxpayers already receive. This smaller allowance often applies in cases such as the Marriage Allowance, savings income, or other tax reliefs.
By using this allowance properly, you can reduce your overall tax bill and keep more of your income. However, many people miss out simply because they are unaware of it or do not apply through HMRC.
Why HMRC Issued the Reminder
Each year, HMRC highlights underused tax reliefs that could benefit households. The 2025 reminder about the £1,047.50 allowance is aimed at ensuring more taxpayers take advantage of it. HMRC data suggests that thousands of couples and individuals fail to claim allowances that they are legally entitled to, resulting in millions of pounds going unclaimed.
The government is particularly keen to ensure that low to middle-income households do not lose out, especially at a time when energy bills, food prices, and housing costs remain high.
Who Can Claim This Allowance
There are several groups of people who may be eligible for the £1,047.50 tax-free allowance. The most common examples include:
- Marriage Allowance claimants where one partner transfers part of their allowance to the other
- Savers who receive interest income that qualifies for the starting rate of savings
- Low-income earners who do not fully use their personal allowance
- Certain pensioners whose income falls within the relevant thresholds
Eligibility depends on your personal circumstances, income sources, and whether you have already claimed related allowances.
The Marriage Allowance Connection
One of the main ways this allowance is used is through the Marriage Allowance. If you are married or in a civil partnership, and one partner earns below the personal allowance threshold, they can transfer £1,260 of their allowance to the higher-earning partner. This transfer reduces the partner’s tax bill by up to £252 per year.
In practice, this often means that the higher earner pays less tax, while the lower earner still has unused allowance. The £1,047.50 figure reflects a common portion of this transfer that many households can benefit from, depending on their income split.
Savings Income and the Allowance
Another area where this allowance comes into play is savings income. If your income from savings is relatively low, you may qualify for tax-free savings interest up to a specific limit. For example, the starting rate for savings allows up to £5,000 of tax-free savings income if your other income is below a certain threshold.
In some cases, the £1,047.50 allowance forms part of the calculation, giving savers the chance to protect more of their money from tax. This can be particularly beneficial for pensioners and those who rely on savings interest.
How to Check If You Qualify
HMRC encourages taxpayers to use its online tools to check eligibility. You can visit the HMRC website and access calculators for Marriage Allowance, savings income, and other reliefs. If you are still unsure, contacting HMRC directly or speaking with a qualified financial adviser can help.
The most important step is to review your income sources and check whether you are fully using your allowances. Many people assume they are not eligible, only to later discover they could have saved hundreds of pounds.
How to Claim the Allowance
Claiming the £1,047.50 allowance depends on which category you qualify under. For Marriage Allowance, you can apply online via HMRC’s dedicated portal. For savings-related allowances, the tax-free element is usually applied automatically by HMRC if your bank reports your interest correctly, but you may still need to confirm through a tax return.
Self-employed individuals and pensioners often need to claim through their annual self-assessment. This ensures that HMRC adjusts their tax code or provides a refund where applicable.
Common Mistakes to Avoid
There are some common errors people make when dealing with tax allowances. These include assuming eligibility without checking properly, failing to notify HMRC when circumstances change, or overlooking the need to reapply for Marriage Allowance if your situation changes. Another frequent mistake is not claiming retrospectively. HMRC allows backdated claims in some cases, meaning you could recover unused allowances for up to four previous tax years.
Financial Impact for Households
The potential savings from this allowance might not seem huge at first glance, but they add up. A couple claiming Marriage Allowance can save around £250 annually. Savers who qualify for tax-free interest may keep significantly more of their returns. For pensioners, the allowance can be the difference between paying tax and keeping their retirement income intact.
At a time when every penny matters, this allowance provides real financial relief, especially for lower-income households.
The Link with the Personal Allowance
It is important to remember that this allowance is separate from the standard personal allowance of £12,570. The two work together, meaning you can earn up to that threshold without paying income tax, and then apply additional allowances like the £1,047.50 for extra relief. Understanding how they interact can make tax planning far more effective.
When to Contact HMRC
If you are unsure about your situation, it is best to contact HMRC directly. Their helplines can explain whether you qualify, what documents are required, and how to claim. Tax advisers and accountants can also help, particularly for self-employed individuals with more complex income streams.
It is always better to clarify your position than risk missing out or paying too much tax unnecessarily.
Backdated Claims
One of the most valuable aspects of this allowance is the ability to make backdated claims. HMRC allows certain taxpayers to claim for previous tax years if they were eligible but failed to apply. For example, Marriage Allowance can be backdated up to four years, potentially resulting in a refund worth over £1,000 for some households.
This is why the current HMRC reminder is so important. Pensioners and working families alike may be entitled to refunds for past years if they act now.
The Bigger Picture
Tax allowances like the £1,047.50 play a vital role in making the UK tax system fairer for households with modest incomes. They also support family finances by ensuring that people do not pay more tax than they should. HMRC’s reminder is part of a broader push to raise awareness and reduce the amount of unclaimed support across the country.
For individuals, the message is clear: check your allowances, make your claims, and don’t leave money unclaimed.
Final Thoughts
The £1,047.50 tax-free allowance may not sound like much, but it can make a real difference when combined with other tax reliefs. Whether through Marriage Allowance, savings income relief, or backdated claims, this allowance is worth exploring for every taxpayer. HMRC’s reminder is an opportunity for households to reassess their financial situation and ensure they are not missing out on money they are entitled to keep.
With rising living costs, pensioners, families, and low-income workers should act now to check eligibility. Claiming this allowance could mean extra savings that ease financial pressures in 2025 and beyond.