The Marriage Tax Allowance – Don’t be One In A Million Who Miss Out

Tax is complicated! With constant changes to the system it’s easy to get in a spin about it. That’s why hiring a good accountant will not only keep you safe from fines for not paying your taxes, but also save you tax by claiming the correct amount.

Tax payments, breaks, and other areas are all down to your circumstances, so you’re advised to always check what you can and can’t legally claim for. But there’s one area that seems so simple we can’t believe so many don’t claim it.

According to Government data, there are still more than one million married couples who don’t claim what they can, despite over three million taking the government up on the offer. First introduced in its current state in 2015, the Marriage Allowance is tax relief for married couples that gives the higher earner an extra £238 a year in their back pocket with the tax break.

How does the Marriage Allowance work?

If you’re married and both earning you might not have realised but you both have an amount of personal allowance that, if added together, means that you can earn £25,000 between you before you pay tax.

The maximum allowance for one person is £12,500.

So, if one of you earns £10,000, you’d only get tax relief on £22,500, not £25,000. There would be an amount of that ‘pooled tax relief’ that simply can’t be claimed.

So, in April 2015 the Government introduced a Marriage Allowance that helps to remedy this and evens out the playing field a little.

It’s a relatively simple set of circumstances that helps a lower earner in the household give some of their tax relief to the higher earner.

Here’s how it works:

  • The Marriage Allowance applies to married couples or civil partnerships in the UK.
  • The lower earner in the couple must earn less than £12,500 per year.
  • And the higher earner must earn between £12,501 and £50,000 (£43,430 in Scotland) per year.
  • The lower earner can give their unused allowance to the higher earner.

The Marriage Allowance uses both couples’ earnings to give a fairer tax and uses the ‘personal allowance’ that we’re all entitled to and evens it out a little. With the Marriage Allowance the lower earner can now transfer up to £1,250 of their unused personal allowance to their partner which would result in tax relief up to £250.

NB: For the above £250 tax relief, the lower earner would be earning £11,250 or less per year, meaning that they have £1,250 left in their personal tax-free allowance. When they transfer this to their partner it results in a £250 tax relief. This the maximum you can claim for.

Here’s a quick example to show you how it works in practice:

David and Sarah are married, and both have paid jobs.

David earns £11,000 a year.

Sarah earns £25,000 a year.

Sarah is using all her tax-free allowance, and David is not.

David is £1,500 below the threshold, so when you combine their household income together and treat the income as one, they’re effectively missing out on this tax relief.

Thanks to the Marriage Allowance, David can transfer up to £1,250 (the maximum amount) of his unused allowance to Sarah, so her take home wage will now be £250 a year better off.

Can you backdate it?

Here’s the exciting news! If you’re one of the one million who haven’t claimed their Marriage Allowance yet, then you can backdate it to April 2015 when it was introduced.

This might mean that (with the above example) you could be entitled to £952 if your earnings qualified you in all years. The chances are this won’t be possible forever though, so apply now and get your claim processed through HMRC.

How do I apply for Marriage Allowance?

You can apply online with HMRC – but do be wary that if you’re claiming any benefits like working tax credits that you’ll need some help with your claim.

Other than that it’s quite a simple process (as HMRC goes) you can apply online here.

If you’d like help claiming your Marriage Allowance of other areas of your personal or company tax please contact us today.