If you are married or in a civil partnership, you or your partner could save up to £212 each year, thanks to the Marriage Tax Allowance.
What is the Marriage Allowance?
Since 6 April 2015, legislation has been in force which allows couples (made up of one non-taxpayer and one basic-rate tax payer) to share part of their annual tax allowance, saving them up to £212 each year. The scheme allows those who earn less than £10,600 each year (the average tax free allowance for the basic rate tax payer), to transfer up to £1,060 of their unused allowance to their spouse.
Who is Eligible?
In order to be considered for the allowance, you must meet the following conditions:
- Be married or in a civil partnership
- Be born after the 6 April 1935 (If you are born before this, you may be eligible for the Married Couple’s Allowance)
- Ensure that the party transferring their personal allowance does not have earnings exceeding £10,600. (This excludes any tax free income e.g. up to £5,000 savings interest)
- Ensure the party receiving the transfer is a basic rate tax payer and has an annual income between £10,601 and £42,385)
The spouse that earns less than £10,600 can transfer their unused personal allowance to their partner – up to a maximum of £1,060. This means their spouse’s tax free allowance can then be increased. If the full amount (£1,060) is transferred, the spouse will receive a tax-free allowance of £11,660, saving the couple 20% or £212.
Jenny makes £7,000 annually as a hairdresser. Her spouse, Jon, makes £30,000 a year. Jenny has £3,000 left of personal allowance and therefore can transfer the maximum allowance of £1,060 to Jon. This gives him a total personal allowance of £11,660 and saves him £212 in tax (£1060 / 20% = £212)
It is important to note that spouses who earn closer to £10,600 and have less than £1,060 of unused personal allowance available can still share their leftover allowance – the tax saving will just be less. Once the process is set up, the spouse receiving the allowance will have their tax code altered to reflect the change.
How to Apply for the Marriage Allowance
You can register for the allowance via HMRC where you will be prompted to confirm both you and your partner’s identity via the online ‘Government Verify’ service. Higher rate payers and cohabitants are not eligible for the marriage allowance.
To register for the allowance visit – https://www.gov.uk/marriage-allowance-guide/how-it-works.