State pensioners in the United Kingdom could be missing out on a tax break worth up to £252 annually due to an underused HMRC benefit, financial experts have revealed. The Marriage Tax Allowance scheme, designed for married couples and civil partners, allows the transfer of unused personal tax allowance between partners. Despite its benefits, millions of eligible Britons are not claiming this advantage.
The tax relief is particularly valuable for retired couples where one partner receives only state pension income. It allows the transfer of up to £1,260 of their unused personal tax allowance to their spouse, helping older couples avoid paying tax on their fixed private and state pension incomes. This scheme offers crucial support for household finances.
The scheme works by enabling a lower-earning spouse to transfer £1,260 of their unused personal tax allowance to their higher-earning partner. With the current personal tax allowance set at £12,570, this transfer can increase the higher-earning spouse’s tax-free threshold to £13,830. This adjustment allows the higher-earning partner to earn more income tax-free, resulting in the maximum annual saving of £252 for eligible couples.
To be eligible for the Marriage Tax Allowance, one partner must earn below £12,570 annually, while the other pays basic rate income tax. The basic rate taxpayer’s income must be between £12,571 and £50,270, and neither partner can earn over £50,270.
State pensioners missing tax benefits
The scheme is applicable to both pension income and working-age earnings, making it particularly beneficial for retired couples. Pensioners born before April 6, 1935, may find it more advantageous to apply for the Married Couple’s Allowance instead. The Marriage Tax Allowance continues automatically each year until it is cancelled or circumstances change.
Applying for the tax break is straightforward through HMRC’s website or by calling 0300 200 3300. Applicants will need their National Insurance number and ID to complete the process. Additionally, couples can backdate their claims to as far back as April 5, 2020, potentially receiving up to £1,008 in backdated tax relief.
The lower-earning partner should typically make the claim and include all sources of income, including pensions, dividends, savings, and work-based earnings. For those who prefer not to apply online, a Marriage Allowance form MATCF can be completed and posted to HMRC. HMRC encourages potential claimants to check their eligibility using their online Marriage Allowance calculator, which takes just 30 seconds.
Once approved, the tax break will automatically apply to the higher earner’s tax-free income until there is a change in circumstances. Couples must cancel the allowance if their relationship ends, their income changes, or they no longer wish to claim.
