State pensioners can avoid HMRC tax on State Pension with underused perk

State pensioners have been reminded that they can reduce their tax bill by as much as £252 by taking advantage of an often-overlooked HMRC perk. The personal allowance is the amount of income that you can earn without paying any tax at all, currently set at £12,570 for anyone who earns under £100,000 a year after pensions and other deductions.

Any earnings above this personal allowance are taxed at the individual's marginal rate, which is 20 per cent on income between £12,571 and £50,270, with higher rates applied to earnings beyond this. However, if you or your partner earn more than £50,270, you cannot 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 retired, and find themselves being a basic rate taxpayer with a spouse who is a non-taxpayer.

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This scenario is common as many higher rate taxpayers will try and manage their income so they become basic rate taxpayers in retirement.

At present, if the non-taxpayer receives the full current State Pension of £10,636.60 per annum, they can transfer £1,260 to their basic rate taxpaying spouse or civil partner and still remain within their personal allowance of £12,570 per annum. This move saves the basic rate taxpayer £252 in tax and can be back-dated four years if applicable, reports Birmingham Live.

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