How to earn £38,230 a year without paying a penny in tax

Picture of our house with cherry blossom, maintained partly with the help of tax-free allowances.

Less money paid in tax = more money to stop the roof falling off


Do you have any idea quite how much money you can earn without paying a single penny in tax?

I’ve just finished typing madly for an article about tax codes (check yours now!).

It really made me realise that if you’d rather keep more of your money, and pay less to the taxman, there are loads of ways to do so. Just this month, another couple of new allowances were introduced to earn extra totally tax-free.

When we made the move from London out to Suffolk, we also left behind London salaries. Sayanora higher pay, but big hello to more time as a family. Nowadays, making the most of tax-free allowances can help boost our income and stop bits of the house falling off.

So have a dekko, and see how quickly it all tots up.

Personal Allowance – £11,500

As a start, you can earn £11,500 without paying any income tax using your Personal Allowance. Sure, if you earn more than £100,000 the taxman will start taking that allowance away, but that sounds like a nice problem to have.

Personal Savings Allowance – £1,000 (adds up to £12,500)

You can also earn £1,000 every tax year in interest on your savings, or £500 if you’re a higher-rate taxpayer. Potentially hard to do, when interest rates are so low, but still a nice chunk of cash. What I didn’t realise before is that if you earn less than £17,000 a year, you don’t pay any interest on your savings interest at all, even if you’re getting interest payments worth more than £1,000. Cheers!

Dividend Allowance – £5,000 (adds up to £17,500)

If you’re willing to invest in the stock market, you can earn £5,000 a year in dividends on shares or funds totally tax-free. The good news is that the Government has abandoned plans to cut this allowance to £2,000 next April, in an attempt to rush through the Finance bill before the election.

Long term, you’ll almost certainly be better off buying any investments within an individual savings account (Isa), as you don’t have to pay tax on anything inside an Isa. However, the dividend allowance is handy if you have shares or funds that aren’t in an Isa, either due to wealth or never-quite-getting-your-act-together.

Rent a Room Relief – £7,500 (adds up to £25,000)

Not so long ago, Rent a Room Relief was hoiked up to £7,500 a year. You can benefit from this one if you let out a furnished room in your own home, for example by taking a lodger or foreign student, or letting a room on Airbnb. Short pause while I feel all nostalgic about my flatmates when I was a first-time buyer.

Sorry folks, it doesn’t work if you’re letting out a whole place somewhere else, so buy-to-let landlords look away now.

Property Income – £1,000 (adds up to £26,000)

Since April 6, you can now earn a grand every tax year from property without paying tax. (OK so we not talking Trump style property tycoon figures)

Again, this could be via Airbnb, but you might also make money renting space in your loft or garage for storage, or hiring out your driveway as a parking space.

You don’t even have to worry about declaring it to the taxman, if it tots up to less than £1,000.

You can’t use Rent a Room Relief and the allowance for property income against the same money, but you could for example do two different things, like letting to a lodger and hiring out your driveway, and still benefit from both.

Trading Income – £1,000 (adds up to £27,000)

Also since April 6, you can earn another grand a year from selling goods or services totally tax-free. So if for example you rake in some extra cash flogging stuff on eBay or Etsy, or from services like babysitting, dog walking, cleaning, ironing or cooking, you can hang onto £1,000 a year without paying tax.

Capital Gains Tax- £11,000 (adds up to £38,000)

I admit this one is a bit of a stretch, because you need to own plenty of stuff in the first place, but you can still earn capital gains of up to £11,300 without having to pay any tax.

Capital gains is the profit when you sell something that has gone up in value.

So maybe you sell shares, or a fancy painting for more than £6,000, or a property that isn’t your home. If their price has soared since you first shelled out, then the difference between what you paid and what you sold counts as a capital gain.

The Government is keen to take a cut, but will at least let you pocket the first £11,000 before hitting you with capital gains tax (CGT). You are also free to sell your own home and your own car without being troubled by CGT.  Cheers for that, HMRC.

Marriage Allowance – £230 (adds up to £38,230)

Believe it or not, you can get free money for being married or in a civil partnership.

This only works if one of you is a basic rate taxpayer, and the other doesn’t earn enough to pay any tax at all. The non-taxpayer transfers 10% of their unused tax-free allowance to the basic rate taxpayer, which means the taxpayer pays less tax. It’s worth £230 this year.

Even better, if you’ve never claimed before, you can whack in claim for this year and the two years before, and get £662 free money. So hop over to and fill your boots.


A whopping £38,230 a year without paying any tax.

Plus, if you salt away savings and investments in Isas, you can whip money out of those to add to your income without paying any tax either. (Although you might want to hoard those Isa savings for as long as possible, as you can’t put any money back in)

Anyone keen to make a mint from any of these allowances? Know of other tax-free ways to stash the cash? I’d love to hear!


Figures correct for the tax year 6 April 2017 to 5 April 2018

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  1. SueB
    13th April 2017 / 2:47 pm

    In defence of taxes. We all need infrastructure and healthcare. An educated population is also a big bonus. A safety net for our poorest or those in need seems the just thing to do.

    Although we shouldn’t pay more tax than we need to, we should feel a bit proud of the taxes we do pay imo 🙂

    • Faith
      14th April 2017 / 10:03 am

      It’s great point that taxes fund so many much-needed services, thanks a lot for commenting Sue.
      However, if the government chooses to create tax-free allowances, I’m a big fan of using them where possible!
      Tax incentives may also be offered to lessen the burden on the state, so freeing up tax revenue for other essential areas. I’m thinking of things like the tax handouts on pensions and Isas, encouraging people to save for their own retirement, rather than relying entirely on the state pension.

  2. 14th April 2017 / 12:06 pm

    Wow that is a fantastic amount of money isn’t it!

    • Faith
      14th April 2017 / 1:32 pm

      I was really surprised when I added it all up.

  3. 14th April 2017 / 12:13 pm

    Nicely broken down view of the tax thresholds and options. My wife’s part-time ranking means we just miss out on the marriage allowance, but it is the least used tax allowance. Something like only 50% of actually claim it.

    • Faith
      14th April 2017 / 1:11 pm

      Shame you miss out on the marriage allowance! And yes, real shame that more people who qualify don’t claim – there are millions entitled to the money and the backdated £662 is a decent amount.

  4. 19th April 2017 / 10:04 pm

    This is a really useful article! Thank you for breaking it down so well. I’ve just realised we may be eligible for the marriage allowance this year – now I just have to get the tax returns sorted!

    I’ve just written a post on the £1000 trading income tax break and I’m going to link to you for more information 🙂

    • Faith
      20th April 2017 / 5:23 pm

      Thank you! Glad you liked the post, and many thanks for linking to it. Definitely worth applying for the marriage allowance if it might be relevant, it’s a really easy process and great to get some free money.

  5. 24th July 2017 / 9:15 pm

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  8. 22nd August 2019 / 2:40 am

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  11. Dawn
    3rd April 2020 / 1:56 am

    Hello My name is Dawn i am just wonder and eraning a good wages from home without to pay to get it started by how do i earn with paying where taxman cant get the tax momey and would love my bank account with lots of money right now as right now very low as got bills to pay as my older son keeps asking me for money i keep telling him that needs to be stooped and pay me back but he keep missing go to the bank as they change times cos of the virus at the min sotrying to find way to work from home

  12. 5th April 2021 / 7:11 pm

    In my opinion, this only works if one of you is a basic rate taxpayer, and the other doesn’t earn enough to pay any tax at all. The non-taxpayer transfers 10% of their unused tax-free allowance to the basic rate taxpayer, which means the taxpayer pays less tax.

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The contents of this blog are for information and ideas, and should not be viewed as financial advice. Use of the material is conditional on there being no liability for how you choose to use it. If you are unsure about any investments or financial issues, please contact a financial adviser.