The marriage allowance is a tax benefit that allows couples to transfer a portion of their personal allowance to their spouse or civil partner. This can result in tax savings of up to £252 per year. However, more than two million couples who are eligible for this allowance have failed to claim it. Those who have missed out can backdate their claim for up to four years, provided they were eligible in each of those years.
Pensions campaigner Ros Altmann has warned that couples who have taken advantage of this allowance could face an unexpected income tax bill as a result. This is because the full new state pension is now £11,502, making it 92 percent of the £12,570 personal allowance. As a result, pensioners who use the marriage allowance to give part of their personal allowance to their partner will have an even lower personal allowance of just £11,310.
Altmann emphasizes that many of those who are at risk of being pushed into tax will be poorer pensioners who rely solely on their state pension to live on. She highlights the potential for fines and penalties for those who are unaware of their tax liability and have never filed a tax return before.
Stephen Lowe, director at the retirement specialist Just Group, confirms that a high number of pensioner couples claim marriage allowance, particularly in situations where one partner has given up work to care for an elderly parent or is unable to work due to health issues. However, he warns that with the increase in state pension, many couples will see their marriage allowance benefits reduced or reversed.
Lowe advises couples to be cautious if the non-taxpayer’s taxable income is likely to be above the £11,310 reduced personal allowance. He explains that the whole £1,260 of personal allowance has to be transferred, which could result in the non-taxpaying partner being pulled into paying tax without giving an equal or bigger tax-saving to their partner.
Overall, couples who claim the marriage tax allowance should be aware of the potential impact on their tax liability, especially if one partner’s income is close to or above the reduced personal allowance threshold. It is advisable to seek professional advice or consult with HMRC to ensure that you are claiming the correct amount of tax relief and to avoid any unexpected tax bills in the future.
