Thousands of pensioners can benefit from a little-known Government tax break that allows couples to save up to £252. Here’s how it works and what you need to know
State pensioners have been reminded that they can dodge paying HMRC tax on their State Pension by utilising an often-forgotten perk.
This could potentially reduce their tax bill by as much as £252. The personal allowance is the amount of income you can earn without having to pay any tax at all. At present, it stands at £12,570 for anyone earning under £100,000 a year after pensions and other deductions.
Any earnings above this personal allowance are taxed at the individual’s marginal rate, which is 20 per cent on income between £12,571 and £50,270, with higher rates applied to earnings beyond that. If you or your partner earn more than £50,270, you won’t be able to benefit from the marriage allowance perk.
The Marriage Allowance allows a non-taxpayer to transfer £1,260 of their Personal Allowance if their spouse or civil partner is a basic rate taxpayer. This increases the spouse or civil partner’s Personal Allowance and reduces their taxable income.
This is particularly relevant for married couples where one stays at home to care for children. However, it’s also crucial for those who are retiring or retired, and find themselves being a basic rate taxpayer with a spouse who is a non-taxpayer, reports Birmingham Live.
This situation is common as many higher rate taxpayers will try and manage their income, so they become basic rate taxpayers in retirement. At present, if a non-taxpayer receives the full current State Pension of £10,636.60 per annum and transfers £1,260 to their basic rate taxpaying spouse or civil partner, this will still fall within their personal allowance of £12,570 per annum.
This move saves the basic rate taxpayer £252 in tax and can be back-dated four years if applicable. If you require assistance, whether it’s for claiming the allowance or reporting a change of circumstances, you can contact the helpline on: 0300 200 3300.
