HMRC’s forgotten perk that could save pensioners hundreds every year | Personal Finance | Finance

State pensioners have been reminded of an underused perk that could help them avoid paying HMRC tax on their State Pension.

By taking advantage of this often-overlooked HMRC perk, state pensioners could reduce their tax bill by as much as £252.

The personal allowance is the amount of income you can earn without having to pay any tax at all. Currently, it stands at £12,570 for anyone earning under £100,000 a year after pensions and other deductions.

Any income earned above the personal allowance is taxed at the marginal rate, which is 20% on income between £12,571 and £50,270, with higher rates applied to earnings beyond that.

However, if you or your partner earn more than £50,270, you won’t be able to benefit from the marriage allowance perk.

This allows a non-taxpayer to transfer £1,260 of their Personal Allowance to their spouse or civil partner who is 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 look after 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-taxpayer spouse.

This scenario is common as many higher rate taxpayers aim to manage their income so they become basic rate taxpayers in retirement, reports Birmingham Live.

At present, if the non-taxpayer receives the full current State Pension of £10,636.60 per annum, and they transfer £1,260 to their basic rate taxpaying spouse or civil partner, this will still be within their personal allowance of £12,570 per annum.

This saves the basic rate taxpayer £252 in tax and can be back-dated four years if applicable.

If you require assistance, either with claiming the allowance or reporting a change of circumstances, you can contact the helpline on: 0300 200 3300.