Claiming the marriage allowance and how it could help you save potentially £1,150
In the current uncertain times, with many of us worried about long-term security, any tax savings are welcome. Josh Ruthven from the Page Kirk Tax Department looks at a provision that can benefit many couples.
The marriage allowance was first introduced from 6 April 2015. It enables one member of a couple to transfer 10% of their personal allowance to their spouse or civil partner in the tax year. As a result their spouse or civil partner receives a tax reduction.
For example, in the current tax year, the personal allowance is £12,500. One member of the couple can give up to £1,250 of their personal allowance and their spouse or civil partner can get a tax reduction of £250, which equates to 20% of the personal allowance given up. The transferee does not receive an increase in their personal allowance; it just reduces their tax liability.
What are the benefits
Eligible spouses or civil partners are able to claim it for the current tax year and the previous four tax years. Therefore, from 6 April 2020 the ability to claim the marriage allowance for the earliest year, 2015/16 will be lost. The allowance can give a recipient a tax reduction of more than £200 per year.
If you backdate your claims, it can result in the following tax savings:
- 2019/20 tax year: personal allowance is £12,500, so £1,250 can be transferred, giving a maximum tax saving of £250
- 2018/19 tax year: personal allowance was £11,850, so £1,190 can be transferred, giving a maximum tax saving of £238
- 2017/18 tax year: personal allowance was £11,500, so £1,150 can be transferred, giving a maximum tax saving of £230
- 2016/17 tax year: personal allowance was £11,000, so £1,100 can be transferred, giving a maximum tax saving of £220
- 2015/16 tax year: personal allowance was £10,600, so £1,060 can be transferred, giving a maximum tax saving of £212
In order to claim, you need to meet the criteria in respect of each year you apply. It is also important to note the full benefit can only be received if the person giving up their personal allowance is not using all of it and the person receiving the tax reduction is eligible to use it.
Who can apply?
You can benefit from the marriage allowance if all the following apply:
- You are married or in a civil partnership, and
- Your income is below the personal allowance threshold, and
- Your partner pays Income Tax at the basic rate, so for example in the 2019/20 tax year their income is between £12,500 and £50,000.
If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple's Allowance instead. You will also not be able to claim both at the same time.
How do you claim the marriage allowance?
The person giving up part of their personal allowance needs to make the claim to HMRC. There is a simple procedure to follow on the GOV.UK website where the claimant will need their own national insurance number and that of their spouse or civil partner. If you are unable to claim online, you can contact HMRC by phone on 0300 200 3300 or by writing to them, stating the years you wish to claim the allowance for.
In addition, if your circumstances change and you become ineligible to claim (for example because of a divorce or because your partner has had an increase in income which makes them liable to tax at the higher rate), then you should let HMRC know.
The marriage allowance is a quick and easy way to gain tax relief so don't miss the opportunity to claim. Remember the deadline for claiming for 2015/16 is 5 April 2020, so make sure you do it as soon as possible if you haven't already done so.
If you would like any more information about this article or if you would like any other tax advice, please call 0115 955 5500 or email enquires@pagekirk.co.uk.