The tax break is worth £250 this year, which would be a welcome boost to couples who have had a pay cut due to Covid-19.

What is the Marriage Allowance?

The Marriage Allowance is available to both married couples and civil partners and was introduced in 2015.

It lets a non-taxpaying partner give up a portion of their unused personal allowance (the amount you can earn before paying tax) to the higher income-earning partner, which results in a lower tax bill for the couple.

The partner earning less than the personal allowance – currently £12,500 – gives up 10% of their allowance to their taxpaying partner. The taxpaying recipient must be a basic rate (20%) taxpayer and earn under £50,000 a year in England or £43,430 in Scotland.

It means the higher earner is able to earn more before paying tax, resulting in a £250 tax bill saving (20% on the £1,250 extra allowance) for the couple, via an adjustment of their tax code.

Are you now eligible for the Marriage Allowance?

Many Brits have faced pay cuts and job losses due to the coronavirus crisis so it’s worth checking to see if you’re now eligible for this tax break.

You may now pay no tax at all because your earnings have fallen within the personal allowance, or you may previously have been a higher rate taxpayer but due to a pay cut, now fall into the basic rate tax band.

You are also eligible to receive the Marriage Allowance – subject to meeting the criteria – if you have been furloughed and receive 80% of your earnings under the government’s Coronavirus Job Retention Scheme or if you’re self-employed and will claim the Self-employment Income Support Scheme.

While many employed and self-employed will receive 80% of their pay under the two government income support schemes, both are capped at £2,500 a month so many will see a big fall in their income. Others will be left out altogether so an additional tax break will be welcome.

Kay Ingram, director of public policy at independent financial advisory firm LEBC group, said: “Some people will not be on 80% of pay – the basis of the furlough scheme – as it is capped at £2,500 per month, so someone who earned £50,000 is only getting 60% of pay for the months on furlough.

“The self-employed who have earned £50,000 historically get no help under the Self-employment Income Support Scheme and many of them are unable to do any work, for example hairdressers, dentists and personal trainers.

“Company directors with low PAYE but mostly dividends will also see a big drop in income due to the furlough pay only applying to the PAYE element.

“For these groups a lengthy lockdown could mean much lower earnings this year.

“In practice it is these company directors and self-employed who have historically been high earners who are likely to benefit most from the Marriage Allowance now as they will have either no or very little income for the duration of lockdown compared to furloughed workers.

“It could also be the case that in a couple, one is made redundant at the end of this so two basic rate taxpayers could become one nil rate and one basic rate.”

How to apply for the Marriage Allowance

If you are applying for the first time, the person who is giving up their allowance will need to contact HMRC (call 0300 200 3300, quoting your National Insurance number, though lines will be very busy), or they can apply online for the Marriage Allowance.

This will result in a tax code change for PAYE employees (for the self-employed, it will mean a reduction on a self-assessment tax return). If earnings then go back to your usual amount, your tax code would be adjusted to claw back the extra relief received.

“However, if this is the case then making a pension contribution or a gift aid donation for the amount by which the taxable income exceeds £50,000 would cancel the extra tax due,” Ingram said.

If couples are entitled to claim for previous tax years (you can backdate claims by up to four tax years) you can request a refund from HMRC. This will be sent by telegraphic transfer to your bank account and can mean £1,188 back in total if you were eligible over the four tax years. If your partner has since died, you can still claim.

HMRC estimates that more than 25% of eligible couples have not yet claimed and falling income is likely to swell these numbers.