08Nov

Life Hacks

Marriage tax allowance: What you need to know

You’ve perhaps heard of the marriage tax allowance but aren’t sure if you’re entitled to it. In this guide, we’ve considered what the marriage tax allowance is and how you could benefit if you are married or in a civil partnership. 

What is the marriage tax allowance?

The marriage tax allowance means that one partner can transfer the amount they can earn tax-free each year of their personal allowance – £1,250 – to their spouse.

The individual paying tax would usually have to pay 20% of this amount but it is tax-free with the marriage allowance. This means as a couple you’ll have £250 that you won’t have to pay tax on.

You can also backdate your marriage tax allowance from 2015 and you could receive a cheque of up to £1,150.

How much can I get from the marriage tax allowance?

In the tax year 2019/20, you could enjoy £250 tax-free. This amount changes over the years, here we’ve listed the marriage allowance for previous years:

    • Tax year 2018/19 – £238
    • Tax year 2017/18 – £230
    • Tax year 2016/17 – £220
    • Tax year 2015/16 – £212

Can I claim for marriage allowance?

You are considered eligible for the marriage allowance if you meet the following requirements:

    • You are married or in a civil partnership.
    • You were both born on or after April 6th 1935.
    • One of you is a non-taxpayer. This currently means you earn less than £12,500 (this amount changes each year, so it’s worth checking beforehand).
    • And the other partner is a basic 20% rate taxpayer and earns over £12,500 and less than £50,000 (£43,430 if you live in Scotland).

How do I apply for the marriage tax allowance?

The non-taxpayer must apply for the marriage tax allowance, this is because their personal tax allowance is the only one that can be transferred. It’s simple enough to apply, you can complete your application online with your National Insurance Number and a form of identification. Click here to go through to the application page. If you’d prefer to apply by phone you can call 0300 200 3300.

Once your application has gone through, you should receive an email confirming this. If you are not eligible, HMRC will write informing you of this.

Do I have to apply for the marriage allowance every year?

No, once you’ve applied, you’ll continue to receive the marriage tax allowance each year until you state otherwise. It’s important to note that if you and your partner divorce, you must let the tax office know or you will need to pay them back in the future. You will also need to cancel the marriage tax allowance if the partner earning less starts to earn more than the annual personal tax allowance – so £12,500 in 2019. 

How is the marriage tax allowance calculated?

The partner on a lower income with an unused amount of personal allowance (£1,250 for the year 2019) will transfer this amount to their partner.

Here is an example of how this could work:

1. Tracey earns £8,000 per year working part-time in a local florist. Her wife Leanne earns £30,000 per year as a PR manager.

2. Both Tracey and Leanne are entitled to £12,500 of their salaries tax-free.

3. Tracey is not using £4,500 of her personal allowance. With the marriage tax allowance, this means Tracey can transfer £1,250 of her personal allowance to Leanne.

4. Leanne now has £13,750 of earnings that she can now enjoy tax-free.

5. She would usually pay 20% tax on the additional £1,250 but because the marriage allowance is tax-free she enjoys £250 extra.

Can I claim marriage allowance if my partner has died?

Yes, if your partner died after 2015 and you meet the eligibility requirements for marriage allowance then you can apply for a backdate. This means you’ll receive a cheque up to £900, with payments for the years you were both alive.

What if my partner dies after applying?

If your partner dies after the £1,250 tax allowance has been transferred to them then less tax will be taken from the inheritance amount tied to their estate. Their estate will simply be treated as if it has a larger personal allowance.

Is there a deadline for when I can apply for the marriage allowance?

No, there is no cut-off date. Simply put in your application and HMRC will calculate when you’ll receive your new allowance or backdated cheque.

When will I receive my marriage allowance?

In most cases, the marriage allowance will be issued by adjusting the taxpayer’s tax code, you won’t be given money – you’ll simply pay less tax. If the taxpayer does self-assessment then the marriage allowance will reduce their overall self-assessment bill.

If you are backdating your marriage allowance this is different and you will receive a cheque from HMRC in the post.

What if I receive a pay increase during the year?

If you are the non-taxpayer but receive a pay increase that puts you over the £12,500 threshold for 2019/20, then HMRC won’t know until the end of the tax year. This means once they realise your pay has changed they’ll claim for the money you owe the following year, via an adjustment to your tax code. It’s a good idea to also cancel your marriage tax allowance to ensure they are aware of any changes.

Why can’t people who aren’t married save on tax?

It’s believed that the marriage allowance was put in place by the Government to reward those who marry and encourage other people to do so as well, as they feel married families are more stable.

Why can’t people born before April 6th 1935 apply for marriage allowance?

There is another – potentially more lucrative – benefit available for those born before 1935. This is called the married couple’s (and civil partner’s) allowance and could result in you enjoying an incredible reduction of £891.50 from your tax bill each year! For those married before 2005, only the husband’s income was used to determine the allowance. You can find out more here.

If you or your partner are not earning enough to pay tax then this benefit could help. Consider the questions above and whether you are eligible and enjoy £250 tax-free.

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