When money saving expert Martin Lewis highlights a tax rule, people tend to listen — and for good reason. Over the years, he has helped millions of UK households understand how to legally reduce their tax bills and claim money they didn’t realise they were entitled to.
Recently, attention has turned to a little‑known rule linked to HM Revenue and Customs that could unlock up to £1,260 in tax‑free income for eligible individuals. For many families, that amount could cover several months of energy bills or significantly ease everyday expenses.
So what is this rule? Who qualifies? And how can you check if you’re eligible?
Here’s everything you need to know — explained clearly and without jargon.
What Is the £1,260 Tax‑Free Boost
The £1,260 figure most commonly relates to the Marriage Allowance — a government scheme that allows one partner in a marriage or civil partnership to transfer part of their unused Personal Allowance to the other.
The Personal Allowance is the amount of income you can earn each tax year before paying income tax. Currently, this is £12,570 for most people.
If one partner earns less than the Personal Allowance and the other is a basic‑rate taxpayer, part of that unused allowance can be transferred — reducing the couple’s overall tax bill.
The maximum saving works out at up to £252 per year. However, claims can be backdated for up to four tax years, meaning some couples could receive up to £1,260 in total.
How the Marriage Allowance Works
Under Marriage Allowance rules:
One partner must earn below the Personal Allowance threshold.
The other partner must be a basic‑rate taxpayer (not higher‑rate).
You must be married or in a civil partnership.
The lower‑earning partner can transfer up to 10% of their Personal Allowance to their spouse or civil partner.
This reduces the higher earner’s taxable income, meaning they pay less tax.
It’s not a complicated loophole — it’s an official scheme many simply forget to claim.
Why So Many People Miss It
Despite being available for years, Marriage Allowance remains under‑claimed.
Common reasons include:
Assuming it applies only to retirees
Thinking income differences must be very large
Believing it is applied automatically
Not knowing claims can be backdated
In reality, the system does not automatically apply the allowance in most cases. Eligible couples must actively claim it.
How the £1,260 Figure Is Reached
The annual saving is currently up to £252.
If you have not claimed for the last four tax years, you may be able to backdate your claim.
£252 × 5 tax years (including the current year) = £1,260.
That lump sum could arrive as a direct bank payment or tax rebate.
For many households, especially during periods of rising costs, this can be extremely helpful.
Who Qualifies
You may qualify if:
You are married or in a civil partnership.
One partner earns below £12,570 per year.
The other earns between £12,571 and the higher‑rate tax threshold.
If the higher earner pays 40% income tax, they are not eligible.
Both partners must have been born after 6 April 1935 to claim Marriage Allowance. Older couples may qualify for a different scheme known as Married Couple’s Allowance.
Is This Linked to the State Pension
Receiving the State Pension does not automatically qualify you.
However, if one partner receives a small pension below the Personal Allowance threshold, and the other has additional taxable income, Marriage Allowance could apply.
It is about income levels — not benefit status.
How to Apply
Applying is straightforward and can be done online through the GOV.UK website.
You will need:
National Insurance numbers for both partners
Proof of identity
Income details
Once approved, the higher earner’s tax code is adjusted to reflect the transferred allowance.
Backdated payments are usually issued directly to the bank account provided.
How Long Does It Take
Processing times vary, but many claims are handled within weeks.
If you are backdating, HMRC may calculate the amount owed and send a lump sum payment.
Future tax years will reflect the allowance automatically unless circumstances change.
What Happens If Circumstances Change
If income levels change significantly — for example, the lower earner moves above the Personal Allowance — the transfer may no longer apply.
You should inform HMRC to avoid underpaying tax.
Similarly, if you separate or divorce, the allowance must be cancelled.
Is This a Refund or New Payment
It is technically a tax reduction rather than a “benefit.”
The money comes from paying less income tax.
If backdated, it may appear as a refund.
For current tax years, it usually appears as an adjustment in your payslip via your tax code.
Example Scenario
Imagine one partner earns £9,000 per year.
The other earns £25,000.
The lower earner has unused Personal Allowance.
By transferring part of it, the higher earner pays less tax.
Over five years, this could add up to £1,260 in savings.
That is money many couples never realise they are entitled to.
Common Misunderstandings
We are retired so it does not apply
It can apply if income levels fit the criteria.
We already share finances so it happens automatically
No, you must apply.
We earn too little to benefit
As long as one partner pays basic‑rate tax, savings may apply.
We are not married but live together
Cohabiting couples are not eligible.
Why Martin Lewis Highlights It
Martin Lewis often focuses on overlooked entitlements rather than new schemes.
Marriage Allowance has existed for years, yet uptake remains lower than expected.
Highlighting it helps households claim money already written into tax law.
In tight financial times, awareness matters.
Is It Really Tax‑Free
Yes — in the sense that it reduces income tax legally owed.
It does not count as taxable income itself.
It simply lowers the amount of tax the higher earner must pay.
What You Should Do Now
Check both partners’ annual income.
Confirm whether one earns below £12,570.
Check whether the other is a basic‑rate taxpayer.
Visit GOV.UK to apply if eligible.
If unsure, you can call HMRC directly for guidance.
Why £1,260 Matters
£1,260 could cover:
Several months of grocery shopping
A significant portion of energy bills
Car insurance
Home repairs
Debt repayment
For many households, it is not just a small bonus — it is meaningful support.
Key Points to Remember
The £1,260 relates to Marriage Allowance backdating.
You must be married or in a civil partnership.
One partner must earn below the Personal Allowance.
The other must pay basic‑rate tax.
Claims can usually be backdated for up to four years.
Final Thoughts
Tax rules are often seen as complicated and intimidating. But sometimes, they are simply under‑used.
The rule highlighted by Martin Lewis is not a loophole or a temporary scheme. It is an established allowance designed to support couples where one partner earns less.
If you or someone you know meets the criteria, checking eligibility could unlock a substantial tax saving — potentially up to £1,260.
In a time when household budgets remain stretched, claiming what you are legally entitled to is not just smart — it is essential.
A few minutes spent checking could lead to a meaningful financial boost.