Marriage Allowance Tax Break

If you are married or in a civil partnership, did you know that you might be entitled to a significant tax break? The marriage allowance is a tax benefit that can potentially save couples hundreds of pounds. However, a lot of people are, unfortunately, unaware of it.

What is the marriage allowance?

The marriage allowance is a government tax initiative, which allows couples to transfer some of their tax allowance to their partner. For the 2020/21 tax year, the personal allowance is £12,500 per year.

So, if your partner is on an income of less than £12,500 per year, they can transfer anything up to a maximum of £1,250 to you. This, in turn, will increase your tax threshold and therefore saving you money on the amount of tax you have to pay.

To be eligible to benefit from marriage allowance, the higher-earner must earn between £12,501 and £50,000, before paying tax.

For example, if you were on an income of £40,000 per year and your partner was earning £8,000 a year, your partner could transfer the maximum amount of £1,250 to you, increasing your allowance to £13,750. As you would typically pay 20% tax on this amount, doing this would be consequently mean a saving to you of £250 for that tax year. HMRC also allows couples to backdate their claim to previous tax years as far back as 2015/16.

Are my partner and I eligible for marriage allowance?

To be eligible, you and your partner must meet the following criteria:

  • You and your partner must be married or in a civil partnership.
  • One of you earns £12,500 or less per year, and the other earns between £12,501 and £50,000.

You can even apply for marriage allowance if you live abroad (provided you qualify for a personal allowance in the UK) or if one of you is receiving a pension.

However, you wouldn’t be eligible to apply for marriage allowance is if you and your partner live together with no legal marriage or civil partnership arrangement.

How do I apply for the allowance?

HMRC do not proactively let you know if you are eligible to claim this benefit. However, you can visit the HMRC website and use their online calculator to establish if you could benefit. You can then apply online via the HMRC website.

Only the partner whose income is less than £12,500 per year can apply for the allowance, as it is their tax allowance which is transferred to the higher earner.

Don’t miss out on this excellent tax-saving opportunity. Check if you qualify for Marriage Tax Allowance today!