Latest figures indicate that just 8% of those eligible for the tax break have applied. Are you missing out? Check out our guide to see if you qualify
When David Cameron launched his flagship marriage tax allowance policy, it was claimed that the family-friendly perk would benefit 4.2 million households. However only an estimated 330,000 couples are taking advantage of the tax saving.
The tax break allows one partner to transfer some of their unused tax allowance to the other — saving their spouse £212 in tax.
The ‘giver’ must be a non-taxpayer and the ‘receiver’ must pay 20% basic rate tax.
After a successful application is made, HMRC must then adjust the tax code of the highest earner to ensure they pay less tax.
How it works
Marriage Allowance lets you transfer £1,060 of your Personal Tax Allowance to your husband, wife or civil partner.
Your Personal Allowance is the income you don’t have to pay tax on – for most people it’s £10,600 (rising to £10,800 in 2016/7).
Adding £1,060 to your partner’s Personal Allowance means they’ll pay £212 less tax in the tax year (6 April to 5 April the next year).
Who can apply?
You can get Marriage Allowance if:
- you and your partner were born on or after 6 April 1935
- one partner’s income is between £10,601 and £42,385
- the other partner’s income is less than £10,600
How much tax you’ll both pay
By claiming Marriage Allowance:
- the person with the higher income’s Personal Allowance increases to £11,660 – they’ll pay £212 less tax
- the person with the lower income goes down to £9,540 – they won’t pay any tax if their income’s less than this
To calculate how much tax you’ll pay as a couple, you’ll need to know your income for the tax year. Don’t include tax-free income, e.g. savings interest under £5,000.
How to apply
You can apply for Marriage Allowance online on the HMRC website or by clicking here.
If your application is successful, changes to your Personal Allowances will be backdated to the start of the tax year (6 April).
How your Personal Allowances change
HMRC will give your partner their extra allowance either:
- by changing their tax code, usually to 1166M – this can take up to 2 months
- when they submit their Self Assessment tax return, if they’re self-employed
Your tax code will also change if you’re employed or get a pension. Your new code will reflect your new Personal Allowance and will end with ‘N’.
When Marriage Allowance stops
Your Personal Allowance will transfer automatically to your partner every year until one of you cancels Marriage Allowance or your circumstances change, e.g. because of divorce or death.
If your circumstances change
You or your partner can contact HMRC to cancel Marriage Allowance. The date the allowance ends depends on who cancels it. If you contact HMRC to stop transferring the allowance to your partner, it will end at start of the next tax year. If your partner contacts HMRC to stop receiving your allowance, HMRC will backdate the change to the start of the current tax year.
If there are changes to your income, you’ll need to let HMRC know. They will tell you if claiming Marriage Allowance would still benefit you or if you need to cancel it.
If your partner dies
If your partner dies after you’ve transferred some of your Personal Allowance to them:
- their estate will be treated as having the increased Personal Allowance
- your Personal Allowance will go back to the normal amount
If you get divorced or dissolve your civil partnership
Contact HMRC to cancel the allowance. You can have the change applied at the start of the tax year (6 April) you got divorced in – or the start of the next one.
If you don’t tell HMRC, the allowance will end automatically at the end of the tax year (5 April).
If you’ve got any further questions about Married Tax Allowance click here.