personal finance

HMRC bungles sums on marriage tax break


HM Revenue & Customs got its sums wrong on the number of individuals taking up a tax break for married couples and civil partners after it counted claimants more than once, in new data revealing that less than half of those eligible are benefiting.

In June last year the Treasury claimed 3m couples were already using the marriage allowance, a tax break introduced in 2015 that lets non-taxpaying spouses transfer 10 per cent of their £12,500 tax-free personal allowance to their partner.

But on Thursday HMRC admitted it had miscalculated the total to the tune of more than 1m. Its revisions found the real number of claimants was likely to be below 1.8m for the 2018-19 tax year.

The tax authority said it had inflated the figures by counting the same claimant multiple times, as it included their backdated claims as well as those for the current tax year.

“The original methodology was based on counting all the years for which applications were made,” said HMRC in the revised document. “This included unsuccessful claims and previous years claimed when individuals made backdated claims.”

“The new estimate of successful claimants does not include any estimate of backdated claims for that tax year,” it said.

The updated numbers mean fewer than half of those who could claim the tax break are doing so.

The marriage allowance lets non-taxpaying individuals transfer £1,250 of their unused personal allowance — the level of earnings on which people pay no tax — to a husband, wife or civil partner.

The partner receiving the allowance must be a basic rate taxpayer and can reduce their income tax bill by £250 a year as a result.

Last year HMRC said about 4.2m married couples, including about 15,000 civil partnerships, could benefit, adding 1m of those had yet to claim. Today’s estimation means more than 2m people have yet to seek the benefit.

Steve Webb, director of policy at Royal London, said: “It is shocking that HMRC have got these figures so badly wrong. This time last year, ministers were boasting that 3m couples were benefiting from this tax break.

“Now it turns out that fewer than 2m are actually getting help, and that more than half of those who are entitled are missing out. HMRC urgently needs to do more to alert families who could benefit so that everyone who is entitled to help receives it.”

An HMRC spokesperson said the take-up rate of marriage allowance was lower than previously estimated but added: “A significant number of couples are still benefiting from the policy by up to £250 a year.”

“No one has missed out,” it said, pointing to the fact that eligible couples have until 5 April 2020 to seek backdated claims for every year including 2015-16.



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