Married couples could lose thousands due to a benefits gap – are you eligible?

If you’re married, you could be rejected or lose your marriage tax allowance, all because of a loophole in the rules.

As stated by GOV.UK, the marriage allowance allows you to 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 (April 6 to April 5 the following year).

Couples can benefit from this if the lowest earner brings in an income below the Personal Allowance – this is usually £12,570. You can backdate your claim to include any tax year from 5 April 2020 in which you were eligible for the marriage allowance.

The Sun reports that the rules state that the partner paying the tax must do so at the basic rate, meaning they earn between £12,571 and £50,270. However, they reveal there is a loophole as you can 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.

RSM tax experts said they have seen several clients being refused marriage tax allowance by HMRC because of this particular issue. They also believe thousands of people could be put off applying for the benefit because of “unclear” guidance on the gov.uk website.

According to guidance on the gov.uk website, your partner pays income tax at the basic rate, which usually means their income is between £12,571 and £50,270 before they receive the marriage allowance. If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which means their income is usually between £12,571 and £43,662.

Emma Newsome, tax associate at RSM, said: “The root of the problem is 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 that it is possible for a person to have an income that exceeds the basic rate threshold of £50,270 while remaining a basic rate taxpayer.”

The Sun reports that the RSM has seen numerous clients whose applications for marriage tax allowance were initially rejected due to ambiguous guidance. However, upon resubmission, these applications were granted the benefit.

HMRC estimates that around 4.2 million couples are eligible for tax relief, but only 2.1 million have claimed it, leaving a further 2.1 million without it. This suggests that if even just 0.5% of claims are incorrectly rejected or not submitted due to misunderstandings of the rules, then up to 21,000 claims could be affected.

However, HMRC denied the issue. A spokesman for HMRC said: “There are no problems processing claims for marriage allowance. Eligibility is based on the rate of tax you pay. For most people, this will be based on your income.”

How to apply for marriage allowance?

You can apply online for marriage allowance. The application is free. If you both have no income other than salary, the person who earns the least should file the claim.

The gov.uk website states: “If either of you get other income, such as dividends or savings, you may need to work out who should claim. You can call the Income Tax Helpline if you are unsure.

“Changes to your personal allowances will be backdated to the start of the tax year (April 6) if your claim is successful.”

Martin Lewis Money Saving Expert Warning

Martin Lewis’s Money Saving Expert (MSE) warns that it’s free to apply and to be on the lookout for scams. They warn: “Beware of Googling ‘marriage tax allowance’. Some shyster firms will charge you to apply (try to look official), but the application is FREE. Follow our guide and the correct links below to do so safely and at no cost.”