Exploring the Benefits of the Marriage Allowance for Couples

Understanding the various tax allowances available can be crucial for couples looking to optimise their financial situation. One such opportunity is the marriage allowance, which, despite common misconceptions, is not a separate allowance but rather a mechanism for transferring a portion of one spouse or civil partner’s personal allowance to the other.

Marriage Allowance vs. Married Couple’s Allowance

It’s important to differentiate between the marriage allowance and the married couple’s allowance, the latter being available only to couples where at least one partner was born before 6 April 1935.

How Does the Marriage Allowance Work?

For the tax year 2023/24, the marriage allowance allows a transfer of 10% of the personal allowance (rounded to the nearest £10), equating to £1,260 from the standard personal allowance of £12,570. However, this transfer is only permissible if the recipient is not a higher or additional rate taxpayer.

Who Benefits from the Marriage Allowance?

This allowance is particularly beneficial for couples where one partner does not fully utilize their personal allowance, and the other is a basic rate taxpayer. By transferring £1,260 of the personal allowance, couples can save up to £252 in tax for the 2023/24 tax year.

The transfer amount is fixed at £1,260, regardless of whether the unused personal allowance is more or less than this amount. In cases where the unused personal allowance is less than £1,260, but the overall tax paid by the couple reduces by making the transfer, it is still advantageous, though it may result in some tax liability for the transferor.

Claiming the Marriage Allowance

Claims for the marriage allowance can be made online at the Gov.uk website. The claim is applicable for the current tax year and can be backdated to include any eligible year from 2019/20 onwards. Once a claim is made, it remains in effect for subsequent years until cancelled.

Examples Illustrating the Marriage Allowance Impact

Example 1: Alex, earning £30,000, and Anna, with no income, can claim the allowance to increase Alex’s personal allowance by £1,260, reducing his tax by £252.

Example 2: Jake, earning £12,000, and John, with an income of £40,000, can also benefit. Though Jake’s personal allowance reduces, and he incurs a small tax liability, John’s increased allowance results in an overall tax reduction for the couple.

Conclusion

The marriage allowance can be a valuable tax-saving tool for couples with varying income levels. It’s essential to understand its implications and eligibility criteria to make the most of this opportunity. For personalised advice and assistance with your claim, feel free to reach out for professional guidance.

 
 
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