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A million married couples still missing out on tax break worth £100s

Paloma Kubiak
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Paloma Kubiak

A million married couples and civil partners eligible for the Marriage Allowance are missing out on the tax break worth up to £238 a year, or £900 when backdated.

The Marriage Allowance was introduced in April 2015. It lets an individual who earns less than the personal allowance 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.

So far, three million couples have benefitted from the Marriage Allowance, according to HM Revenue & Customs (HMRC), with over 300,000 signing up since March 2018.

But, more than a million eligible couples are losing out on the tax break worth up to £900 in total.

How the Marriage Allowance works

You both need to be born on or after 6 April 1935 and the recipient can’t be a higher or additional rate taxpayer. An individual earning less than the personal allowance can transfer 10% of this to their husband, wife or civil partner, as long as the recipient is a basic rate taxpayer.

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 personal allowance this tax year is £11,850, meaning £1,185 can be transferred to the partner, resulting in a £237 tax break. However, HMRC rounds the figure up to £1,190, meaning the recipient gets £238.

The receiving partner will get the extra allowance either through a change in their tax code (can take up to two months) or when they send their self-assessment tax return, if they’re self-employed.

As the Marriage Allowance can be backdated up to four tax years, eligible couples can also make the following claims (£662 as a lump sum):

  • 2017/18 tax year: the personal allowance was £11,500 so £1,150 can be transferred, resulting in a £230 tax break.
  • 2016/17 tax year: the personal allowance was £11,000 so £1,100 can be transferred, resulting in a £220 tax break.
  • 2015/16 tax year: the personal allowance was £10,600 so £1,060 can be transferred, resulting in a £212 tax break.

How to claim the Marriage Allowance

In order to claim (the lower earner needs to apply), you need to have your National Insurance number and prove your identity via the online Marriage Allowance application portal, such as by giving details from your P60, payslips, passport or child benefit, for instance.

The personal allowance will transfer automatically to a spouse or civil partner every year until one partner cancels the Marriage Allowance because circumstances change, such as for divorce or earning over the personal allowance threshold.

Deceased spouse or born before 1935?

At the November 2017 Budget, the Exchequer announced the Marriage Allowance will be extended to surviving spouses.

For married couples born before 6 April 1935, you can claim the more generous Married Couple’s Allowance instead. You can only claim one of the marriage benefits, not both, so if you’re eligible for the Married Couple’s Allowance, it can reduce your tax bill by between £336 and £869.50 a year.