Tax raid on marriage allowance perk to hit 100,000 couples

More than 100,000 married couples face shock bills this year because of the Government’s “stealth tax” freeze on thresholds.

Around 2.3m spouses claim the marriage allowance – a tax break introduced by George Osborne, the former chancellor.

But an estimated 127,680 will lose the perk as thousands are dragged into higher tax bands in 2024-25.

The marriage allowance reduces couples’ tax bills by allowing the higher- earning spouse to transfer £ 1,260 ( 10pc) of their personal allowance to their partner.

The basic rate taxpayer will receive a tax credit equivalent to the amount transferred, saving them up to £252 per year.

However, a couple can only claim it if one spouse is a basic rate taxpayer and the other earns less than the personal allowance, currently £12,570.

With income tax thresholds frozen until 2028- 29, nearly 3m people will be pulled into the higher rate tax bracket over the coming years, according to official figures.

As a result, close to 128,000 couples will lose the allowance as their earnings creep over the threshold, experts have predicted.

Sean McCann, of financial advice firm NFU Mutual, which carried out the analysis, said: “Crossing the threshold into higher rate tax once your income exceeds £ 50,270 can bring some unwelcome tax surprises.

“Exceeding the threshold by only one pound means that you lose the ability to claim the allowance.”

Pensioners could be among the worst affected as they may have savings interest that drags them over the higher rate threshold or takes their annual income above the personal allowance.

The number of people hit with tax on their savings interest has jumped by more than 1m in a single year because of soaring interest rates, according to figures obtained by stockbroker AJ Bell in a freedom of information request.

Basic rate taxpayers can earn up to £1,000 in interest on their savings before having to pay tax at their marginal rate.

This drops to £500 once they become a higher- rate taxpayer. This means someone with £ 20,000 outside of a tax-wrapper, in an account paying 5pc interest, would owe £200 in tax.