HMRC loophole means state pensioners could get £252 tax break - do you qualify?

State pensioners are being encouraged to reclaim £252 through a lesser-known HMRC tax loophole. The Marriage Allowance is commonly utilised by working individuals, but it can also be beneficial for pensioners, potentially putting up to £252 annually back into their pockets.

This entirely legal tax loophole is most effective when one partner earns the majority of a couple's income and the other has a low income, such as a state pensioner. The Marriage Allowance allows a low-income individual to transfer their remaining unused tax allowance to their spouse or civil partner.

For instance, if someone earned £10,000 and their partner earned £48,000, they could transfer some of their unused allowance to their partner, reducing their tax bill, provided they earn less than £50,270. The current state pension stands at £11,502 per annum, but this only applies to those on the full new state pension who have made full National Insurance contributions.

Those on the old basic state pension, or who have missed NI years, will receive even less.

The Marriage Allowance allows you to transfer up to £1,260 of your unused personal allowance to a partner, increasing their tax-free band to £13,830 from £12,570. This means that the partner would not pay any tax on the first £13,830 they earn, instead of the first £12,570, equivalent to an extra £252 a year for the state pensioner to spend, reports the Express.

You can also backdate your claim to April 2020, reducing your partner's tax bill by the amount corresponding to the years you are backdating. Gov.

Uk explains: "Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year)."

To benefit as a couple, you (as the lower earner) must normally have an income below your Personal Allowance - usually £12,570. "When you transfer some of your Personal Allowance to your husband, wife or civil partner you might have to pay more tax yourself, but you could still pay less as a couple."