Every year, millions of UK taxpayers overpay without even realising it — not because of mistakes, but because they fail to claim the allowances and reliefs that the system quietly provides. These “hidden” allowances are entirely legitimate, yet they remain overlooked by a large proportion of taxpayers, often resulting in hundreds or even thousands of pounds lost annually.
Understanding these lesser-known opportunities is not only about saving money; it’s also about maximising your financial efficiency and taking full advantage of the incentives built into the UK tax system. Whether you’re employed, self-employed, retired, or managing investments, knowing where these hidden allowances lie can make a considerable difference to your overall wealth.
Let’s explore the most commonly missed tax allowances in the UK — and how to ensure you never miss them again.
1. Marriage Allowance – Up to £252 Each Year
One of the most under-claimed tax breaks in the UK is the Marriage Allowance. It allows one partner (the lower earner) to transfer a portion of their personal allowance to their higher-earning spouse or civil partner.
For the 2024–2025 tax year, this means the lower earner can transfer £1,260 of their personal allowance, potentially saving the couple up to £252 in tax. What’s more, you can backdate your claim for up to four previous tax years — which could mean a refund of more than £1,000 for some households.
Eligibility requires that:
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You’re married or in a civil partnership.
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One partner earns less than the personal allowance threshold (£12,570).
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The other partner is a basic-rate taxpayer.
2. Marriage and Civil Partnership Transfers on Capital Gains
Beyond income tax, couples also benefit from the ability to transfer assets between themselves without incurring Capital Gains Tax (CGT). This strategy allows them to make full use of both partners’ CGT annual exemptions, effectively doubling the amount that can be sheltered from tax.
In the 2024–2025 tax year, the annual CGT exemption is £3,000 per person — meaning a couple can jointly dispose of assets and gain £6,000 tax-free before CGT applies. This simple but often overlooked allowance can lead to significant savings when planning investment disposals.
3. Trading Allowance – £1,000 for Casual Income
If you earn some income from side hustles, freelancing, or small self-employment projects, the Trading Allowance is a quick win. It allows you to earn up to £1,000 of trading income tax-free each tax year without the need to register as self-employed or file a Self Assessment for that income alone.
This applies to occasional earnings such as:
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Selling goods online
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Offering tutoring or creative services
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Renting tools or equipment
If your earnings exceed £1,000, you can still use the allowance as a deduction against your total income, potentially reducing your tax liability.
4. Rent-a-Room Relief – Up to £7,500 Tax-Free
Homeowners who rent out a furnished room in their home can earn up to £7,500 per year tax-free under the Rent-a-Room scheme. This allowance applies even if you rent through Airbnb or similar platforms.
If you share ownership of the property with a partner, each of you can claim half — meaning up to £3,750 each tax-free.
This relief often benefits retirees or city-based homeowners who occasionally rent out spare rooms to lodgers or short-term guests.
5. Property Allowance – £1,000 for Occasional Property Income
Separate from the Rent-a-Room scheme, the Property Allowance allows you to earn up to £1,000 tax-free from occasional property income — such as renting a driveway, garage, or garden space.
Many people unknowingly skip this simple allowance because they don’t consider such small rentals as taxable income. However, when claimed correctly, it can eliminate the need for additional paperwork while keeping your income tax-free.
6. Savings Allowance and Starting Rate for Savings
Even modest savers often miss out on two key allowances that help reduce tax on interest income:
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Personal Savings Allowance (PSA) – Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free; higher-rate taxpayers can earn £500 tax-free.
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Starting Rate for Savings – If your other income is below £17,570, you could earn up to £5,000 in savings interest tax-free.
Many people assume that bank interest is automatically taxed, but in most cases, banks no longer deduct tax at source — meaning you must claim any relief due directly.
7. Dividend Allowance – £500 Tax-Free
For shareholders and investors, the Dividend Allowance provides the first £500 of dividend income tax-free in 2024–2025. While this allowance has been reduced in recent years (from £2,000 to £500), it remains valuable for those holding shares in private or public companies.
When combined with an ISA (Individual Savings Account), you can effectively shield both your capital and income from tax altogether — an efficient way to build wealth with minimal leakage to HMRC.
8. Gift Aid – Boost Donations and Reclaim Extra Tax
When you donate to charity and tick the Gift Aid box, the charity can reclaim the basic rate tax on your donation — but if you’re a higher- or additional-rate taxpayer, you can reclaim the difference between the basic rate (20%) and your higher rate (40% or 45%) on your Self Assessment.
For instance, if you donate £1,000 under Gift Aid, the charity receives £1,250, and you can reclaim £250 (or more) via your tax return. Yet many higher-rate taxpayers overlook this, leaving money unclaimed.
9. Pension Contributions – The Overlooked Relief
Contributing to your pension isn’t just about saving for retirement — it’s also one of the most tax-efficient ways to reduce your taxable income. For every £80 you contribute, the government adds £20 in tax relief at source.
Higher- and additional-rate taxpayers can claim further relief through their tax return, often recovering up to 25% or more of the contribution value. Over time, this translates into thousands of pounds in effective savings.
However, many forget to update their Self Assessment to reflect these contributions, missing out on valuable tax relief.
10. ISA Allowance – £20,000 Tax-Free Growth
Each UK resident has an annual ISA allowance of £20,000, allowing investments or savings to grow completely tax-free. While most people are aware of ISAs, few use them strategically — for example, by combining Stocks & Shares ISAs with Lifetime ISAs or Innovative Finance ISAs.
Maximising your ISA each year protects not just your interest or dividends, but also future capital gains, which can compound into substantial tax-free wealth over time.
11. Blind Person’s Allowance – An Overlooked Entitlement
Those registered blind (or severely sight-impaired) are entitled to an extra Blind Person’s Allowance, worth £2,870 in 2024–2025. If unused, it can also be transferred to a spouse or civil partner, effectively boosting their tax-free threshold and providing additional household savings.
This allowance is often unclaimed simply due to lack of awareness — even though it can make a real difference for affected taxpayers.
12. Tax-Free Childcare and the Marriage of Benefits
Families with children under 12 (or under 17 for those with disabilities) can claim up to £2,000 per child per year in government contributions under Tax-Free Childcare. Yet many parents eligible for this scheme fail to apply, losing out on thousands of pounds annually.
Similarly, those combining Child Benefit with careful income planning (keeping adjusted net income below £50,000) can avoid the High-Income Child Benefit Charge, which otherwise claws back a portion of their benefits.
13. Capital Loss Relief – Turning Losses into Future Gains
When investments or property sales result in a loss, many taxpayers forget to report these losses to HMRC. Doing so creates a valuable allowance that can be carried forward indefinitely to offset future capital gains — significantly reducing future tax bills.
For instance, a £10,000 loss today can save £2,000–£2,800 in tax on future gains. But if not reported within four years, this benefit is lost permanently.
14. Professional Expenses and Work-From-Home Deductions
Employees and self-employed individuals can both claim deductions for necessary work expenses. These include professional subscriptions, travel costs, uniforms, and home-office expenses.
Since the pandemic, HMRC has allowed flat-rate home working allowances of £6 per week (or more if actual costs are proven). However, most employees never claim these — missing simple refunds worth £300+ per year.
Freelancers and consultants, on the other hand, can deduct a wider range of costs, including part of rent, utilities, and equipment — provided they maintain proper records.
15. The Power of Annual Tax Planning
Most missed allowances stem from a simple issue: people think about tax only once a year, usually near the filing deadline. Effective tax planning, however, is best done throughout the year — ideally with professional guidance.
A qualified advisor can:
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Identify unclaimed allowances specific to your situation.
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Help you structure income, investments, and savings tax-efficiently.
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Ensure compliance with changing HMRC rules while maximising benefits.
That’s where My Tax Accountant can make a difference. Their experts specialise in identifying overlooked reliefs, structuring personal tax strategies, and ensuring clients don’t leave money on the table.
✅ Final Thoughts
The UK tax system may seem complex, but within that complexity lies opportunity. By understanding and utilising the full range of allowances available — from marriage and savings reliefs to pensions and capital gains offsets — you can legally and effectively reduce your tax bill each year.
Even small allowances add up, and with professional advice, those hidden savings can become meaningful boosts to your financial stability. The key is awareness, timely action, and a willingness to treat tax planning not as a chore, but as a vital part of your personal wealth strategy.
