How thousands of married couples could be rejected or miss out on £1,260 benefit due to loophole – have you missed out?
THOUSANDS of married couples could be rejected or miss out on marriage tax allowance due a loophole in the rules, The Sun can reveal.
Marriage tax allowance lets you transfer £1,260 of your personal allowance to your partner, if they earn more than you.
Your personal tax-free allowance is £12,570. Once your earnings go over this level, you start paying income tax at the basic rate of 20%.
However, in married couples where one spouse earns below the personal allowance, they can transfer up to 10% of it to their partner.
This adds up to a maximum of £1,260 to the partner’s personal allowance, reducing the tax they pay by up to £252 a year.
You can reclaim the tax back by up to four years – meaning the benefit is worth £1,008 in total.
According to the rules the partner who pays tax must do so at the basic rate, which means they earn between £12,571 and £50,270.
However, there is a loophole as you may still qualify for the benefit if you earn more than £50,270 in income – but pay into a pension or make a gift aid contribution.
Tax experts RSM told The Sun that they’ve seen a number of clients who have been rejected for marriage tax allowance by HMRC due to this issue.
RSM also believes that thousands could be put off from applying for the benefit due to “unclear” guidance on the gov.uk website.
According to guidance on gov.uk website, income tax at the basic rate is “usually” paid between £12,571 and £50,270, rather than spelling out that there are ways to still claim if you earn over £50,270.
Emma Newsome, tax associate at RSM, told The Sun: “The root of the issue lies with HMRC’s unclear guidance.
“A person can remain a basic rate taxpayer when they make a personal pension contribution or gift aid donation in the relevant tax year.
“This means it is possible for an individual to have income exceeding the £50,270 basic rate threshold while remaining a basic rate taxpayer.”
It claims to have seen a string of clients who’ve also had marriage tax allowance claims rejected due to the unclear guidance and once they’ve been resubmitted they have been awarded the benefit.
HMRC estimates that 4.2 million couples are eligible for the tax break, but only 2.1million claim it with a further 2.1million missing out.
This means that even if just 0.5% of claims are wrongly rejected or not submitted due to mis-understanding the rules, then 21,000 claims could be affected.
HOW TO APPLY FOR MARRIAGE ALLOWANCE
YOU can apply for marriage allowance online for free.
If both of you have no income other than your wages, then the person who earns the least should make the claim.
If either of you gets other income, such as dividends or savings, you may need to work out who should claim.
You can call the income tax helpline on 0300 200 3300 if you’re unsure.
Changes to your personal allowances will be backdated to the start of the tax year (6 April) if your application is successful.
To apply online, visit www.gov.uk/apply-marriage-allowance.
If you cannot apply online, you can apply:
- Through self assessment if you’re already registered and send tax returns
- By filling in marriage allowance form MATCF and sending it to the address on the form
You can download the MATCF form by visiting www.gov.uk/guidance/apply-for-marriage-allowance-by-post.
However, HMRC denied the issue.
An HMRC spokesperson said: “There are no problems with processing applications for Marriage Allowance.
“Eligibility is based on the rate of tax you pay. For the majority of people, this will be based on your income.”
If you only pay income tax at the basic rate and believe you’ve been wrongly denied marriage tax allowance, you can appeal the decision directly to HMRC.
You’ll need to call the marriage allowance enquiries helpline to speak to an agent and explain the issue.
You can do this by calling 0300 200 3300.