The Marriage Allowance – could you save £250 a year in tax?
If you’re married or in a civil partnership, you may be entitled to up to £1,150 tax benefit called the Marriage Allowance, but many couples are still missing out!
For non-taxpayers, the Marriage Allowance lets you to transfer £1,250 (10%) of your Personal Allowance (the amount you can earn tax-free each tax year based on 2019/20 rates) to your spouse or civil partner – if they are a basic rate taxpayer. If your claim is successful, it would reduce their tax by up to £250 in the tax year. But, even better, if you’re only just hearing about this, you can also backdate your claim to include any tax year since 6th April 2015 that you were eligible for Marriage Allowance. This could result in a total tax rebate of as much as £1,150.
Am I eligible?
To benefit as a couple, you (as the lower earner) must have an income below your Personal Allowance – this is currently £12,500. Your spouse or civil partner should pay income tax at the basic rate, which means their income is currently between £12,501 and £50,000. However, don’t forget the £50,000 threshold can be extended, for example if a pension contribution is made.
So, put simply, one of you must be a non-taxpayer and one must be a basic-rate taxpayer!
The non-taxpayer makes the claim. It is very simple, only taking a few minutes. You can apply at any time in the tax year, as HMRC will change the tax code for the remaining months of the tax year. All you will need to have to hand is both of your National Insurance numbers and proof of your identity for the person making the claim. You’ll receive a confirmation email and your partner will receive a new tax coding notice confirming that their Personal Allowance has been increased. They will also receive a payment for any tax overpaid, if backdating the claim to previous years.
The other good news is once HMRC have confirmed you are eligible; you do not have to re-apply every year. Your personal allowance will transfer automatically to your spouse or civil partner until one of you cancels the Marriage Allowance or you inform HMRC that your circumstances have changed, e.g. because of divorce, change in employment pushing you into a higher-rate tax threshold or death.
If you wish to find out more and check your eligibility, please follow the link here.