You are here: Home - Saving & Banking - News -

How married couples can claim a £600 tax break

0
Written by: Paloma Kubiak
15/03/2017
Married couples could be eligible to receive a tax break worth around £600 from next month. Here’s what you need to know and how to claim.

The Marriage Allowance was introduced in April 2015. It lets an individual who earns less than the personal allowance to transfer a small percentage of the allowance to their partner. This boosts the receiving partner’s personal allowance, meaning they can earn more before they start to pay tax.

Around four million married and civil partner couples are eligible for the tax break but HM Revenue & Customs (HMRC) reports that only 1.73 million are benefitting.

This means there are still more than two million couples who are missing out. Here’s how it works and how you can claim your money.

How the Marriage Allowance works

An individual earning less than the personal allowance can transfer 10% of their personal allowance to their husband, wife or civil partner.  This increases their earnings threshold and reduces their tax bill. It applies even if you currently receive a pension or you live abroad, as long as you still get a personal allowance.

The current personal allowance (2016/17 tax year) is £11,000 so the lower income earner can transfer £1,100 to their partner.

The scheme is only available if the receiving partner is a basic rate tax payer, so the 20% tax that they would have paid on £1,100 is now tax-free, meaning they save £220.

In the new 2017/18 tax year, the personal allowance rises to £11,500 meaning £1,150 can be transferred to an eligible partner. As a result, married couples are able to gain a £230 tax break.

If you were eligible for the Marriage Allowance in the 2015/16 tax year, you can make a backdated claim of £212, based on the previous personal allowance of £10,600. HMRC confirms you can claim back up to four tax-years, though the scheme has only been running since April 2015.

This means that from 6 April, eligible married and civil partners can claim a total of £662.

When you apply online for the Marriage Allowance (the lower earner needs to apply), there is a section asking if you want to backdate the claim.

If you register for a personal tax account, the back payments can be paid through your bank account as a lump sum. Otherwise, it will be paid in the form of a cheque posted to the applicant.

For the 2017/18 tax year, your tax code will be adjusted if you’re in PAYE. For a self-employed applicant, this amount should be taken into consideration when you come to do your tax return.

It can take some weeks for the allowances to be altered and for tax codes to be amended so you may need to be patient.

What’s the Married Couple’s Allowance?

While similar in name, the marriage allowance is separate to the Married Couple’s Allowance. The married couples allowance could reduce your tax bill by between £322 and £835.50 a year.

But one of you must be born before 6 April 1935. If you and your partner were born on or after 6 April 1935 you’ll be eligible for the Marriage Allowance as detailed above.

For marriages before 5 December 2005, the husband’s income is used to work out Married Couple’s Allowance. For marriage and civil partnerships after this date, it’s the income of the highest earner.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

After an award-winning health insurance provider?

Winner of best online health care provider in the YourMoney.com Awards 2015

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
philip-hammond-chancellor
Chancellor scraps self-employed tax hike

Chancellor Philip Hammond has withdrawn his plan for National Insurance Contribution (NICs) rises for self-employed workers.

Close