There are more than 4 million married couples and 15,000 civil partners are eligible to a tax break worth up to £238 in 2018/19. It is designed for couples where one partner pays the basic rate of income tax and the other partner pays none.
Millions of couples are entitled to the tax break but not many people know about it. Here is a breakdown of everything you need to know on Marriage Allowance ensuring you claim if you are eligible.
Watch our video to learn more.
Marriage Allowance entitlement
Whichever person doesn’t pay tax is eligible to reduce their personal allowance by £1,190 and then able to transfer it over to their husband, wife or civil partner. This therefore enables the tax paying spouse to increase their tax-free personal allowance to £13,040.
You may benefit from the Marriage Allowance if:
- You partner has chosen to reduce their personal allowance and transfer it to you
- You’re a basic rate taxpayer in 2018/19
- You meet the residence requirements and have the right to claim personal allowance
- Neither you nor your partner submits a claim to the married couples allowance in 2018/19
However, you can only benefit from one tax reduction in any tax year.
Personal Allowance
You can choose to reduce your personal allowance as long as you have been married or in a civil partnership with the same person for the whole or part of the tax year at the time the claim is made.
You only have 4 years to elect to use the marriage allowance, after the end of the tax year, and it will remain there until you give notice to have it withdrawn. But remember, an election made after the end of the tax year only applies to the year of election. This is the easiest way for your allowance to be operated as it can be made when your tax return is prepared.
Separation and Divorce
There is a slight chance that you will lose you eligibility if you and your spouse or civil partner separate between the end of the tax year and the date that your return is due.
Cancelling the marriage allowance will usually take effect from the next tax year unless the marriage or civil partnership has come to an end through:
- Divorce
- Order of judicial separation
- Decree of nullity
- In the case of a civil partnership, a dissolution order. Order of nullity or order of separation
The marriage allowance can be backdated to the start of the tax year in these circumstances.
Death of a Partner
It is possible to make a backdated claim for the marriage allowance if a spouse or civil partner dies. This would be providing that the deceased spouse or civil partner was eligible for it when they were alive.
A claim can be made for any tax year in which you were both alive, including the tax year of death, although no claim can be made thereafter.
How does it work?
Will is on an annual salary of £16,000 a year and is married to Amy who works part time and earns £5,000 a year.
Amy has elected to reduce her personal allowance, which is then transferred when Will claims the marriage allowance. The benefit is 10% of the personal allowance rounded up to the next £10.
The transferable amount is then £1,190 giving them tax savings of £238 and this transfer will not impact on Will’s national insurance contributions.
I hope you found this useful. If you would like to know more, then please get in touch.