Britain’s great stealth tax raid is gathering pace – and couples are firmly in the firing line. There are now 39.1m income taxpayers, up 6.1m since tax thresholds were frozen in 2021/22, according to HMRC data.

The number paying basic rate tax has jumped to 30.4m (up 3m), higher rate taxpayers to 7.08m (up 2.65m) and additional rate taxpayers to 1.23m (up 710,000). More than 8.7m taxpayers are over state pension age – a rise of 29% since the freeze. And more than a fifth of taxpayers now pay higher or additional rates.

With thresholds locked until April 2031, the squeeze is set to intensify. But couples willing to plan carefully can shield thousands of pounds from the taxman.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “The frozen income tax thresholds have taken a horrible toll, so that more than a fifth of taxpayers now pay higher or additional rates. Between us, we’re paying billions more in tax than we did this time last year, and it’s only going to get worse, because those tax thresholds have been frozen until April 2031.

“It means the idea of generating a tax-free income has become even more attractive. Fortunately, there are a number of allowances and rules which mean you can take steps to protect yourself from a horrible tax bill.”

13 ways couples can fight back

1. Double personal allowances – £25,140 tax free

Every person can earn £12,570 before paying income tax. For couples, that’s £25,140 tax free.

Beware the £100,000 trap: the allowance is cut by £1 for every £2 earned above this level, creating an effective 60% tax rate between £100,000 and £125,140. Pension contributions can help reduce taxable income.

2. Earn £7,500 tax free from a lodger

Under the rent-a-room scheme, the first £7,500 from renting a furnished room is tax free. The limit has been frozen since April 2016 – so higher rents risk tipping landlords into a tax return.

3. Make £1,000 from a side hustle – tax free

The trading allowance lets you earn £1,000 from hobbies or online selling without tax. Selling personal belongings isn’t usually taxable unless a single item fetches more than £6,000.

4. Another £1,000 from property

A separate £1,000 property allowance applies to certain rental income (excluding rent-a-room).

Savings: How couples can double up

5. Personal Savings Allowance

Basic rate taxpayers can earn £1,000 interest tax free; higher rate taxpayers get £500. Additional rate taxpayers get nothing. A couple of basic rate taxpayers could shield £2,000 in interest between them.

6. Starting rate for savings – up to £5,000 extra

If non-savings income is below the personal allowance, up to £5,000 of savings interest can be tax free – on top of the personal savings allowance. In theory, someone could earn £12,570 in wages and £6,000 in savings interest without paying tax. The allowance shrinks £1 for every £1 earned above the personal allowance.

7. Use your ISA allowances

Each adult can invest £20,000 a year in an ISA, with interest or returns completely tax free. For couples, that’s £40,000 sheltered annually – a powerful long-term shield.

8. Premium Bond prizes

Whether it’s £25 or £1m, winnings are tax free.

Investments: Where ISAs really shine

9. Tax-free income from stocks and shares ISAs

Dividend income, bond income and capital gains inside an ISA are free of tax. Outside an ISA, only the first £500 of dividends is tax free. The dividend allowance has fallen from £5,000 (2016) to £500 (2024).

Dividend tax rates rose in April 2022 to 8.75% (basic), 33.75% (higher) and 39.35% (additional). From April 2027, the basic rate will be 10.75% and the higher rate 35.75%. For income-hungry couples, ISAs are increasingly indispensable.

10. Lifetime ISA income at 60+

Withdrawals from a Lifetime ISA from age 60 are tax free. Couples who both hold LISAs can each generate tax-free retirement income.

11. Dividend allowance outside ISAs

The first £500 of dividends outside an ISA is tax free – but no more.

Tax planning: The real power for couples

12. Share assets to double allowances

Married couples and civil partners can transfer assets between them.

That means doubling up on:

• Personal allowances
• ISA allowances
• Dividend allowances
• Savings allowances

If one partner pays higher-rate tax and the other basic rate, moving income-producing assets can dramatically cut the household’s bill.

13. Purchased life annuities

Bought with non-pension money, part of the income is treated as a return of capital – and is tax free. The interest element is taxable, but may fall within allowances.

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