Married couples could save as much as £252 on their tax bill
State pensioners have been reminded of a lesser-known HMRC perk that could help them avoid paying tax on their State Pension, potentially reducing their tax bill by up to £252. The personal allowance is the amount of income you can earn without having to pay any tax, currently set at £12,570 for anyone earning under £100,000 a year after pensions and other deductions.
Any income above this allowance is taxed at the marginal rate, which is 20 per cent on earnings between £12,571 and £50,270, with higher rates applied to earnings beyond this. However, if you or your partner earn more than £50,270, you won’t be able to benefit from the marriage allowance perk.
This allows a non-taxpayer to transfer £1,260 of their Personal Allowance to their spouse or civil partner who is a basic rate taxpayer, increasing their Personal Allowance and reducing their taxable income. This could be particularly beneficial for married couples where one person stays at home to look after children, or for those who are retiring or already retired and find themselves as a basic rate taxpayer with a non-taxpayer spouse.
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Many higher rate taxpayers aim to manage their income so they become basic rate taxpayers in retirement.
At present, if the non-taxpayer gets the full current State Pension of £10,636.60 per annum, and they transfer £1,260 to their basic rate taxpaying spouse or civil partner, this will still be within their personal allowance of £12,570 per annum. This saves the basic rate taxpayer £252 in tax and can be back-dated four years if applicable, reports Birmingham Live.
If you require assistance, either with claiming the allowance or reporting a change of circumstances, you can contact the helpline on: 0300 200 3300.
