Updated: May 14, 2018
What is Marriage allowance?
Marriage Allowance is a scheme run by HMRC to make taxes on married couples fairer. It basically reduces the tax bill for couples where one partner is earning most of the income by allowing the lower earner to transfer some of their tax free personal allowance to the higher earner if they aren’t using it.
How does it work?
We all get £11,850 of tax free income in 2018/19 (£11,500 in 2017/18) so if one partner is earning less than the £11,850 then they could transfer up to £1,150 of this personal allowance to their higher earning partner to effectively lower the overall tax bill for that couple. This is either done by applying online or making an adjustment to the tax returns. Going forward, the tax codes for each partner will then reflect the transfer of personal allowance until the Marriage Allowance is cancelled or circumstances change.
Marriage Allowance is not for all married people as they tax break is designed to help out couples that earn below the national average income collectively but pay more tax than others because one partner earns the majority of the income. The Marriage Allowance can only be used if:
The lower earner is earning less than £11,850 per year;
The higher earner is earning more than £11,850 but less than £46,350;
You are married or in a civil partnership.
What are the benefits?
In monetary terms, transferring £1,150 of unused personal allowance to a partner that is only a standard rate tax payer will only save £230 a year so it’s not a huge sum of money but as the admin is fairly minimal it’s still a worthwhile exercise. Marriage allowance can also be backdated so if you’ve qualified for several years but not claimed it, you could back date it and potentially save around £600.