Sarah Laing looks at the income tax marriage allowance, and points out that although backdated claims may currently be worth up to £662, many couples are missing out.
According to government statistics, some four million married couples and 15,000 civil partnerships stood to benefit from the marriage allowance (MA) when it was introduced in April 2015. However, recent reports indicate that around two million couples have failed to claim their share of the government’s £1.3 billion MA cash pot. Every couple should, therefore, check whether they might be eligible.
What is marriage allowance?
Broadly, although not strictly a separate allowance, MA is a way for couples to transfer a proportion of their individual personal allowance between them in a tax-efficient manner.
Who can claim?
Where a couple satisfies the following criteria, it should be possible to claim the allowance:
- the couple must be either married or in a civil partnership – living together is not sufficient for the allowance to be claimed;
- one partner needs to be a non-taxpayer – which generally means they are earning less than the personal allowance (£11,500 for 2017/18, rising to £11,850 from 6 April 2018);
- the other partner needs to be a basic rate (i.e. 20%) taxpayer, which generally means they are earning less than £45,000 in 2017/18 (rising to £46,350 for 2018/19) (note that rates are different for Scottish taxpayers). Higher rate and additional rate taxpayers are not entitled to the allowance; and
- both partners must have been born on or after 6 April 1935 (but see below regarding claims to married couple’s allowance).
What is it worth?
For 2017/18, the maximum amount that can be transferred from one partner to the other is £1,150, which means that the spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £230 for 2017/18 (i.e. £1,150 @ 20%).
The allowance was introduced on 6 April 2015. For 2015/16, it was worth £212. For 2016/17, the allowance was raised to £1,100, making it worth £220. Backdated claims are possible – a claim for all three years from 2015/16 to 2017/18 inclusive will, therefore, be worth £662!
The allowance is set to rise to £1,185 on 6 April 2018, so it will be worth a further £237 in 2018/19.
How do I claim?
In summary, MA is likely to be due if one party to a couple is a non-taxpayer and the other is a basic-rate taxpayer. If this applies to your situation, make sure you make a claim.
Claims can be made online via the Gov.uk website at www.gov.uk/apply-marriage-allowance or by calling the HMRC helpline on 0300 200 3300.
HMRC will require both partner’s National Insurance number, and one of a range of different acceptable forms of ID for the non-taxpayer. Note that it is the partner who is the non-taxpayer who must apply for the relevant proportion of their unused personal tax allowance to be transferred to a partner who pays tax at the basic rate.
In most cases, the allowance will be given by adjusting the recipient partner's personal tax code, and the allowance will be received via the PAYE system. The partner who transferred their personal allowance will also receive a new, reduced, tax code, which will be operated against their employment income where applicable. If the recipient partner is self-employed, the allowance can be claimed via the self-assessment tax return, and the allowance will be given as a reduction against their self-assessment tax liability.
Married couple’s allowance
The marriage allowance should not be confused with married couple’s allowances (MCA), which may be claimed where one partner was born before 6 April 1935. MCA can currently reduce the claimant’s tax bill by between £326 and £844.50 a year. Further information on MCA can be found on the Gov.uk website at www.gov.uk/married-couples-allowance.
Practical Tip:
As announced in the 2017 Autumn Budget (applicable from 29 November 2017), it is possible to claim MA even where one partner has died since April 2015, providing all the eligibility criteria outlined above is satisfied.
