State pensioners can reduce their tax bill by up to £252 by utilizing an often-overlooked HMRC perk. This perk allows pensioners to transfer part of their personal allowance to their spouse, increasing their allowance and reducing taxable income.
State pensioners have been reminded that they can avoid paying HMRC tax on their State Pension by utilising an underused perk. This often-overlooked HMRC perk could reduce state pensioners' tax bill by as much as £252.
The personal allowance, which is the amount of income you can earn without paying any tax at all, currently stands at £12,570 for anyone who earns under £100,000 a year after pensions and other deductions. Any income earned above this personal allowance is taxed at the individual's marginal rate, which is 20% on income 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 are ineligible for the marriage allowance perk. The Marriage Allowance allows a non-taxpayer to transfer £1,260 of their Personal Allowance to their spouse or civil partner if they are a basic rate taxpayer, thereby increasing their Personal Allowance and reducing their taxable income.
This is particularly beneficial for married couples where one partner stays at home to care for children, but it's also worth considering for those who are retiring or already retired and find themselves as a basic rate taxpayer with a non-taxpaying spouse. This scenario is common as many higher rate taxpayers aim to 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.
For any assistance, either with claiming the allowance or reporting a change of circumstances, individuals can contact the helpline on: 0300 200 3300.
STATE PENSION HMRC TAX SAVINGS PERSONAL ALLOWANCE MARRIAGE ALLOWANCE
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