Are You Eligible For A Tax Windfall?

January 2020
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If you spent more than you intended in the run up to Christmas, you may be bracing yourself for a large credit card bill. Help could be at hand from HMRC.

Married couples and civil partners
You may be eligible for a tax refund of up to £1,150 if you are married or a civil partner, born after 6 April 1935, with one of you with income of less than the personal income tax allowance of £12,500 and the other with income above this but less than £50,000 (£43,430 in Scotland).

The marriage allowance was introduced in 2015 and allows the lower earner to transfer 10% of their personal income tax allowance to their spouse/civil partner, which increases the amount they can earn tax free. HMRC estimate that only half of the 4 million couples, eligible for this tax break, have applied. Those couples who opt for the new civil partnership for opposite sex couples will become potentially eligible from 1 January.

In the current year this is worth £250. It can be backdated for up to 4 years and could be worth a total of £1,150 if all 4 years are now claimed. Those eligible in 2015/16 have only until 5 April 2020 to claim for this year. If a spouse has died since 2015 and would have been eligible, a claim can also be made on their behalf.

To claim, visit  or call 0300 200 3300 HMRC’s helpline. The spouse/civil partner with the lower income needs to claim and will need their national insurance number, proof of identity and personal bank details if a repayment is to be made into a bank account. For future years, the higher earners tax code will be adjusted so that their take home pay will rise in line with increases in the tax-free allowance.

Over age 84?
Couples, where one is born before 6 April 1935, may be better off to claim Married Couples Allowance which is worth between £345 and £891.50 per year for those who are eligible. An explanation of this can be found here: › married-couples-allowance.

Pension Savings Tax Relief and Gift Aid
If you have paid into a personal pension, stakeholder pension or SIPP via a payment from your bank account and are a higher rate taxpayer, with taxable income in excess of £50,000 (£43,430 in Scotland) you may be eligible for some additional tax relief. Pension providers usually grant basic rate relief of 20% at source and add this to your pension payment, so every £8 you pay in becomes £10 invested in your plan.

If you are a 40% (41% Scotland) or 45% (46% Scotland) taxpayer personal pension contributions qualify for tax relief at the highest rate you pay. A claim can be backdated for 4 years. Additional rate tax relief is also available for charitable donations made under the gift aid scheme.

To claim you need to file a self assessment tax return or contact your tax office with details of the amounts paid, contract number and the tax year in which the payments were made.

Pension Freedom Withdrawals
Those over age 55 may make flexible withdrawals from personal pension plans, if these exceed the tax -free lump sum, usually up to 25% of the fund, the pension provider deducts tax at source on the extra. They are required by HMRC to apply an emergency code. If no subsequent withdrawals have been made, nor a tax return filed in the meantime, a substantial refund could be due. Claims for overpaid tax can be backdated for up to 4 years.

In the last 12 months HMRC have refunded £163,114,001 on £9.08 billion of taxable withdrawals* but many taxpayers withdrawing more than the tax- free amount may still be due a refund. 

Check Your Tax Code
Those paid under PAYE should not assume that the tax code used by the employer to deduct tax from pay is correct. Around 25% of tax codes are out of date at any one time. This is because it is   based on the information HMRC hold about your income and the allowances you are eligible for. Employers have to use the code HMRC gives them. Changes in circumstances such as changing a job, a pay rise or bonus, starting to draw a pension or cashing in savings and investments can all affect the tax you owe. If the wrong tax code is applied, you may have underpaid or overpaid tax. Check your payslip and question HMRC about any code that does not look right.

Kay Ingram
Director of Public Policy, LEBC

The FCA does not regulate Tax advice

*HMRC Flexible Payments from Pensions:  October 2018- October 2019, HMRC Pension Scheme Newsletters

Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. The contents of this blog are for information purposes only and do not constitute individual advice. A pension is a long-term investment. The fund value may fluctuate and can go down. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.  If you are unsure of the suitability of any investment or product for your circumstances, please contact an adviser. All information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation, are subject to change. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts.


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