Marriage Tax Allowance: Get a tax break worth up to £662

Are you married or in a civil partnership? If so you may be entitled to a £662 tax break called the marriage tax allowance. Yet 2.4 million of the 4.2 million eligible couples are still missing out. It’s free money, so worth checking. This article from MoneySavingExpert.com explains if you could be eligible and how you can apply.

The marriage tax allowance is a little-known way for couples to transfer a proportion of their personal allowance (the amount you can earn tax-free each tax year) between them. Here’s The Money Saving Expert’s Q&A on how to get it, plus some key information.

Who can get it? This is the most important factor as only people with these specific circumstances will be able to apply:

  • You’re married or in a civil partnership (just living together doesn’t count).
  • One of you needs to be a non-taxpayer, which usually just means earning less than the £11,500 personal allowance (£11,000 for 2016/17).
  • The other needs to be a basic 20% rate taxpayer (higher- or additional-rate taxpayers aren’t eligible for this allowance). This means you’d normally need to earn less than £45,000 (£43,000 for 2016/17).
  • You both must have been born on or after 6 April 1935 (if not there’s another tax perk).

So in a nutshell one of you must be a non-taxpayer and one must be a basic-rate taxpayer.

What’s this about £662, wasn’t it £432 last year? The marriage tax allowance started on 6 April 2015, and in year one was worth £212. For the following tax year, starting in April 2016, it was worth £220. For this tax year – beginning April 2017 – it’s worth £230. Plus claim it now and it’s backdated so many get previous years’ AND this year’s allowance – £662.

The rest of this guide uses allowances and thresholds for the 2017/18 tax year, though as we say above you can also claim for previous tax years, with the rates and thresholds for last year in the section above this.

Already applied in the last tax year? You’ll automatically get the marriage tax allowance this year and only need to inform HM Revenue & Customs (HMRC) if your circumstances have changed making you no longer eligible.

You don’t need to reapply if you got the marriage tax allowance last year.

Sounds promising – so how do the maths work? The partner who has an unused amount of personal allowance can transfer £1,150 of their allowance to the other (so basically 10% of the full allowance). It doesn’t matter if they have £5,000 of allowance left or £500; they can only transfer £1,150.

This is how it works:

Part-time Peter works just enough and earns £5,000 at his local fish and chip shop. His full personal allowance for the year is £11,500, so he has plenty of spare allowance to transfer £1,150 to his wife.

Peter’s wife, full-time Fiona, is a software developer. She earns £35,000 and is a basic-rate taxpayer (higher-rate tax starts at £45,000 for most). Her personal allowance increases by £1,150 to £12,650 when Peter chooses to make his transfer.

So she has an extra £1,150 which she would’ve paid tax on at 20% but is now tax-free, so she’s £230 up (20% of £1,150).

OK, so how do we actually apply? It really is very simple, and only takes a few minutes; just use the application at HMRC. To do it you’ll need both your national insurance numbers, and one of a range of different acceptable forms of ID for the non-taxpayer.

If there’s a problem doing it via the web just call 0300 200 3300 and do it by phone.

It’s worth noting you can also only apply for those years in which you both met the criteria. So if you earned more than the £11,000 personal allowance in 2016/17, HMRC won’t allow you to claim it.

There is one very important point to make though…

It’s the non-taxpayer who must apply to transfer their allowance.

If the taxpayer applies you’re doing it the wrong way round and it won’t work.

After going through the application process you’ll be immediately informed that your application has been received via email (you can apply over the phone too). If you were also eligible for the allowance in previous tax years, you’ll have to select this option as part of the application process.
Although the onus is on you to check you’re eligible, HMRC will write to inform you if you’re not – although you may have to wait a few weeks.

If you would like some more information, visit The Money Saving Expert website


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