Married couples could be missing out on thousands due to benefit loophole - are you eligible?

A mid section of a young man wearing a green shirt is holding his wedding ring
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If you are married, you may be rejected or missing out on marriage tax allowance all because of a loophole in the rules.

As stated by GOV.UK, 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 (April 6 to April 5 the next year).

Couples can benefit from this if the lower earner brings in an income below your Personal Allowance - this is usually £12,570. You can backdate your claim to include any tax year since April 5 2020 that you were eligible for Marriage Allowance.

The Sun reports that the rules state the partner who pays tax must do so at the basic rate, which means they earn between £12,571 and £50,270. However, they reveal that there's 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 said they have observed several clients being denied the marriage tax allowance by HMRC on account of this particular issue. They also believe that thousands could be put off from applying for the benefit due to "unclear" guidance on the website.

According to guidance on 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 Marriage Allowance. If you are in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £12,571 and £43,662.

Emma Newsome, tax associate at RSM, said: "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."

The Sun reports that RSM has observed numerous clients who have had their marriage tax allowance claims initially rejected due to ambiguous guidance. However, upon resubmission, these claims have been granted the benefit.

HMRC estimates that approximately 4.2 million couples are eligible for the tax break, yet only 2.1 million have claimed it, leaving another 2.1 million not benefiting from it. This suggests that if even a mere 0.5 per cent of claims are incorrectly rejected or go unsubmitted due to misunderstandings of the rules, then up to 21,000 claims could be impacted.

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."

How to apply for Marriage Allowance?

You can apply for Marriage Allowance online. It’s free to apply. If both of you have no income other than your wages, the person who earns the least should make the claim.

The website states: "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 if you’re unsure.

"Changes to your Personal Allowances will be backdated to the start of the tax year (April 6) if your application is successful."

Martin Lewis Money Saving Expert warning

Martin Lewis' Money Saving Expert (MSE) warns that applying is free and to be vigilant of scams. They caution: "Beware against googling 'marriage tax allowance'. Some shyster firms will charge you for applying (they try to look official), but it's FREE to apply. Follow our guide and the correct links below to do it safely and at no cost."