Marriage Allowance - Are You Missing Out?

When the Marriage Allowance was introduced in April 2015, it was estimated that around 4.2 million couples could benefit. It has emerged that only 2.2 million couples have taken advantage of the allowance, leaving around 2 million couples missing out on their share of £1.3 billion of cash – yet it is so simple to claim.

What is Marriage Allowance, and are you eligible?

Marriage Allowance allows one partner to transfer their Personal Allowance to the other, providing that both of their income meets certain criteria.

To qualify for the allowance in 2017/18, one partner must earn less than £11,500 (the Personal Allowance), and the other must earn between £11,500 and £45,000 (therefore paying standard rate income tax of 20%).

If the above does apply, then the lower earner can transfer any unused tax-free allowance of up to 10% of the value of the full Personal Allowance e.g. up to £1,150 in 2017/18. When taxed at 20%, this could save up to £230 in the current tax year.

If you have only just realised you are eligible, or have been in the past, then you can backdate your claim to include any tax year since April 2015. Taking into account the previous personal allowances, if you were to claim for 2015/16, 2016/17 and now 2017/18, then you could gain £662. Steven Webb, director of policy at Royal London, believes it is likely that any claims for a previous tax year will simply be paid out in the form of a cheque.

How to apply for the allowance:

Applications can be submitted at www.gov.uk/apply-marriage-allowance. The application must be submitted by the non-taxpayer/lower earner, and they will need their own and their partner’s national insurance number, as well as proof of identification. Once applied, the Marriage Allowance will automatically be applied to their partner every year until either one of them cancels the allowance, or through a change of circumstance e.g. divorce of death.

Although the allowance only applies if you and your partner were both born on or after 06 April 1935, if either of you were born before this date you can benefit from a different allowance called Married Couples Allowance. By applying for this, you could reduce your tax bill by between £326 and £844 per year.  You can obtain this by either filling in the Married Couples Allowance section on your tax return, or by contacting HMRC and providing details of your marriage/civil partnership ceremony and your spouse/civil partner, including their date of birth,

If you believe that you may qualify for either Marriage Allowance or Married Couples Allowance, please do give us a call and we can talk you through the process, and help calculate how much you could reduce your tax bill by.