A retirement expert has warned that an unexpected tax bill will affect hundreds of thousands of retirees, with women particularly vulnerable.<\/p>\n\n\n\n
Because of the frozen income tax allowance, married couples and civil partners who gave part of their tax allowance to their spouse or civil partner may find themselves becoming taxpayers for the first time.<\/p>\n\n\n\n
With the state pension increasing and the personal allowance frozen at \u00a312,570, an increasing number of seniors are approaching the tax threshold, putting those receiving Marriage Allowance – typically women – at risk of being struck.<\/p>\n\n\n\n
Steve Webb, partner at LCP said: \u201cThis is yet another unwelcome by-product of the year-on-year freeze in the value of the tax allowance.<\/p>\n\n\n\n
\u201cHundreds of thousands of women have signed over part of their tax free allowance in order to reduce their husband\u2019s tax bill. But as the state pension rises many of these women may now find they end up with an unexpected tax bill.<\/p>\n\n\n\n
\u201cWe could see Marriage Allowance \u2018mayhem\u2019 as hundreds of thousands of couples have to decide whether to carry on with this arrangement or cancel it, to avoid low income pensioners being dragged into the tax net.<\/p>\n\n\n\n
\u201cThe sooner the freeze on tax allowances comes to an end, the better\u201d.<\/p>\n\n\n\n
The Marriage Allowance lets a non-taxpayer transfer 10 per cent of their personal allowance to their civil partner or spouse if they\u2019re a basic rate taxpayer.<\/p>\n\n\n\n
Around 2.1 million couples benefited from the tax break, worth up to \u00a3252 per year in tax saving to the couple, in 2020\/21, with just over one in three of those estimated to be pensioner couples.<\/p>\n\n\n\n
People who claim Marriage Allowance will continue to be non-taxpayers as long as they are more than 10% below the tax threshold (usually \u00a311,310).<\/p>\n\n\n\n
However, huge increases in the state pension, which climbed by 10.1% in April and is anticipated to rise by 8.5% next year, mean that seniors are getting closer to the poverty line.<\/p>\n\n\n\n
The complete new state pension is currently roughly \u00a310,600 per year, and if it rises in step with average earnings under the triple lock, it will be \u00a311,500 next year.<\/p>\n\n\n\n
With \u00a311,500 consuming more than 90% of the maximum personal allowance, persons who have claimed Marriage Allowance and do not cancel it may begin receiving tax bills.<\/p>\n\n\n\n
Couples affected by this case would have two options:<\/p>\n\n\n\n
Non-pensioner couples will also be affected by the issue, but Sir Steve pointed out that in many such working age couples, there will be a \u201cstay-at-home\u201d partner with little to no taxable income.<\/p>\n\n\n\n
For pensioners, even the lower income partner may be relatively close to the tax threshold due to the state pension.<\/p>\n\n","protected":false},"excerpt":{"rendered":"
A retirement expert has warned that an unexpected tax bill will affect hundreds of thousands of retirees, with women particularly vulnerable. Because of the frozen income tax allowance, married couples … <\/p>\n