Do you claim the Marriage Allowance? According to HM Revenue & Customs, there are more than four million couples who are eligible for this tax break, but only two million claim it.
At a time where family finances are under increasing pressure amid rising food prices (opens in new tab), skyrocketing fuel costs (opens in new tab) and hefty energy price cap (opens in new tab) predictions, it has never been more important to assess your financial situation. Now is the time to make sure you are claiming any tax breaks, rebates (opens in new tab) and assistance that you are entitled to.
Even though Chancellor Rishi Sunak has announced a £15 billion cost of living support fund (opens in new tab) to help struggling families, if you’re married or in a civil partnership, you may also be eligible to claim a tax break in the form of the Marriage Allowance.
Here we explain what it is, how it works and how much you could claim.
What is the Marriage Allowance?
Also known as the Marriage Tax Allowance, the Marriage Allowance is a tax break that enables those who are married or in a civil partnership to give their partner a portion of their tax free personal allowance to save on income tax (opens in new tab).
But there are stipulations.
You can only give a fixed amount of £1,260 each year and one partner must earn less than the annual tax-free personal allowance of £12,570, or be a non-taxpayer. The other partner must be a basic rate taxpayer, paying the 20% rate of income tax. This means that person’s earnings and income must be between £12,571 and £50,270 a year. If you live in Scotland, these limits will be slightly different.
Giving up £1,260 of your £12,570 personal allowance to your partner, reduces their tax by up to £252 each tax year.
How much do you get for the Marriage Allowance?
The Marriage Allowance is worth up to £252 in the current tax year. However, if you have never claimed it before and were eligible, you can backdate your claim to include any tax year since 5 April 2018.
You can use the marriage allowance calculator (opens in new tab) on the Government website to see how much you might be able to save by claiming.
Rather than being paid as cash, the higher earning partner will have their tax code adjusted, which means they will pay less tax each month. The adjusted code will normally include the letter M to show their claiming the Marriage allowance. If the higher earning partner is self-employed, any adjustment in tax will usually be made when they file their self-assessment form.
How is the Marriage Allowance calculated?
There is a great example on the Government website to explain how the marriage allowance works.
If your income is £11,500, and your personal allowance is £12,570, you will not pay tax on your earnings.
If your partner’s income is £20,000 and they also have a personal allowance of £12,570, they pay tax on £7,430. As a couple you are paying income tax on £7,430.
But when you claim the Marriage Allowance, you transfer £1,260 of your personal allowance to your partner. Your personal allowance therefore becomes £11,310. Your partner’s then effectively becomes £13,830.
While this means you now pay tax on £190 (£11,500 income minus your £11,310 personal allowance), your partner will pay tax on £6,170 (£20,000 income minus the £12,570 personal allowance and the £1,260 transferred allowance). As a couple, this means you are paying income tax on £6,360 rather than £7,430. This means a £214 tax saving.
Who qualifies for the Marriage Allowance?
You will only qualify for the Marriage Allowance if you are married or in a civil partnership, do not pay income tax (or earn below the £12,570 personal allowance) and if your partner pays income tax at the basic rate. This normally means their earnings are between £12,571 and £50,270 a year.
Higher or additional rate taxpayers are not eligible for this allowance.
Additionally, you cannot claim the Marriage Allowance if you and your partner live together but are not married or in a civil partnership.
How to apply
The non-tax payer (or lower earning partner) must be the one to apply for the Marriage Allowance. You can easily do this online through the Government website (opens in new tab).
As well as needing the National Insurance number for yourself and your partner, you will need to provide proof of ID and your P60.
Once you have applied, you should get a confirmation email within 24 hours. There is no need to reapply each year – the allowance will continue automatically.
You must tell HM Revenue & Customs if your circumstances change, if you and your partner split up or if your income has increased, as you may no longer be eligible to claim.