HMRC will send letters to eligible claimants with a new letter M tax code to boost their tax-free Personal Allowance up to £13,830.

The Personal Allowance, the amount of money you can earn without paying any Income Tax on it, has been stuck at £12,570 since 2021 and after the Government’s recent announcement that it will extend the freeze for another 3 years to 2031, the allowance will have been held in place for a decade.

Because of inflation, it means more and more people will be pushed into paying more tax, in what is known as fiscal drag.

But married couples can boost their Personal Allowance by 10% thanks to Marriage Allowance, a legal tax reduction vehicle offered by HM Revenue and Customs.

Those who are married, or in a civil partnership, can transfer some tax allowance between one another in order to avoid some tax.

One of the couple needs to be a non-taxpayer, ie earning under the £12,570 allowance, and the other must be a 20% taxpayer, earning above it.

The non-taxpayer then applies to HMRC to transfer 10% of their allowance to their taxpayer husband/wife.

This transfers £1,260 of their tax allowance to their partner, boosting the recipient’s tax-free allowance by £1,260 to £13,830 instead of £12,570. It saves approximately £252 in a single tax year, and it can also be backdated for four more years, which is paid to you by cheque.

To give you the £1,260, HMRC will send both spouses a new tax code letter – M for the recipient, and N for the one doing the transfer.

The tax code, for example 12570L, is what tells your employer what to deduct from your salary. 12570L, the most common code, then becomes 12570M or 12570N once you receive the letter of tax code change from HMRC.

HMRC’s explanation via gov.uk says: “Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. Your Personal Allowance is the amount you can earn before paying tax.

“This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year).

“How your tax code will change.

“You and your partner will get new tax codes that reflect the transferred allowance. Your tax code will end with:

“Your tax code will also change if you’re employed or get a pension.”