The marriage tax allowance explained

The marriage tax allowance explained

Marrying or entering a civil partnership with the person you love doesn’t just bring a bright and happy future together. It also confers a financial benefit in the form of the marriage tax allowance.

The marriage tax allowance is a tax relief specifically for couples that are married or in a civil partnership. If this applies to you, you could be entitled to a £900 per year tax break. It is essentially free money so it is definitely worth checking if you qualify even if your partner has passed away.


What is the marriage tax allowance?

The marriage tax allowance is a way in which couples can transfer a proportion of their personal allowance to one another. Personal allowance is the amount you can earn before paying income tax in the UK – the allowance currently stands at £11,850 for 2018/19 (up from £11,500 in 2017/18).

Marriage allowance lets you gift as much as £1,190 of your personal allowance to your husband, wife or civil partner if they earn more than you; reducing their tax bill by up to £238 over the tax year.

And there’s more. You can even backdate your marriage allowance claim to cover previous years to a limit of £900; so the savings you could make when you claim are considerable.


Can we claim for marriage tax allowance?

The marriage tax allowance will only really make a difference to you as a couple if one of you has an income of £11,850 or less and the other is a basic 20% rate taxpayer.

Higher and additional-rate taxpayers are not eligible for the allowance so neither one of you may earn more than £46,350 per year to participate in the scheme.

You will both need to have been born on or after the 6th April 1935, and you can even claim this tax relied if your partner has died since April 2015.

The marriage tax allowance also applies if either one or both of you are self-employed. As long as you meet the other criteria, you can apply.


How does it work?

Say your spouse or civil partner worked part-time at a supermarket earning £5,000 per year. Their personal allowance, regardless of your income, is £11,850 – so there is an extra £6,850 in tax-free earnings that, because they’re not earning enough up to the threshold, your household is unable to benefit from.

If you are a company director earning £30,000 in total and therefore you are a basic-rate taxpayer, your personal allowance will also be £11,850 and your taxable income would be £18,150. But, with the marriage tax allowance, your spouse or civil partner may transfer a proportion of their unused allowance to you.

This would increase your personal allowance by £1,190 to £13,040 – this will produce a saving of £237 in income tax a year.


When does marriage tax allowance stop?

Once your claim has been accepted, your personal allowance will continue to transfer to your partner automatically every year until one of you cancels the marriage allowance or your personal circumstances change, such as a divorce or change in income.


How can we apply?

If your application is successful, the changes to your personal allowance will be automatically backdated to the start of the tax year (the last April 6th). The higher earner will then be given their extra allowance either by changing their tax code or when they file their self-assessment.

Applying for marriage tax allowance couldn’t be simpler, as you can fill out this handy online form in just a few minutes. You can apply for Marriage Allowance online here or, if you are having difficulties applying, call HMRC on 0300 200 3300 or speak to your SMART Team accountant for further advice.

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