Fear of having to deal with HMRC stops couples using ‘flagship’ tax break

DAVID CAMERON’S flagship married tax allowance has been taken up by just one in eight married couples because they are reluctant to engage with the taxman, the official financial watchdog has suggested.

The Office for Budget Responsibility (OBR) revealed that just 12 per cent of couples – equivalent to 495,000 people – have taken advantage of the £212 a year allowance. It had been estimated that 3 million couples would do so. The OBR suggested that the low take-up was because of a “reluctance to engage with HMRC”, as well as problems with the taxman’s IT systems and a lack of awareness about the allowance.

The failure of more people to take up the allowance has saved the Government more than £400million, the OBR said.

It added that even by 2020 just half of those eligible will have taken advantage of the allowance.

The OBR said: “Take up for this measure has been much lower than initially assumed. Lower take-up is likely to reflect issues with HMRC’s IT systems, a lack of awareness about the allowance and possibly a reluctance by those eligible to engage.”

Conservative MPs have previously said that the allowance, at just £4 a week, is too low for people to take up.

Iain Duncan Smith, the Work and Pensions Secretary, was said to be pushing for a rise in the allowance in the Budget. However, it remains unchanged.

A £2 million advertising campaign was launched to promote the policy, with print and digital advertising, and radio adverts to draw couples’ attention to the entitlement.

Both of them must be born on or af- ter April 6 1935, to qualify and one earner in the couple must be a basic rate taxpayer on a salary of less than £42,385 and the other must earn less than the threshold when income tax kicks in – currently £10,600.

The scheme, which came in on April 6 in 2014, lets the lower earner give £1,060 of their unused personal allowance to their spouse or civil partner so they pay less tax as a couple, giving them an additional £212 a year.

Once a couple has signed up online, HMRC is supposed to adjust the tax codes to ensure the right amount is paid into their bank account.

Mr Cameron said at the time: “Other countries recognise marriage in the tax system and it’s high time we did so again in Britain.

“It is also important, while we’re doing lots for two-earner couples in terms of new support with childcare, that this new tax measure will benefit those who choose to stay at home or work part-time in order to care for their families.”