Recent government statistics indicate that out of four million eligible couples, around half are still not benefiting from the income tax Marriage Allowance (MA). The allowance was first introduced in April 2015, which means that a backdated claim made in 2017/18 could be worth up to £662. It is worth checking to make sure claims are made, where appropriate. In brief, MA is a way for couples to transfer a proportion of their individual Personal Allowance between them in a tax-efficient manner. Where a couple satisfies the following criteria, it should be possible to claim the allowance:
- The couple must be either married or in a civil partnership – living together is not sufficient for the allowance to be claimed.
- One partner needs to be a non-taxpayer – which generally means they are earning less than the personal allowance (£11,500 for 2017/18, rising to £11,850 from 6 April 2018).
- The other partner needs to be a basic 20% rate taxpayer, which generally means they are earning less than £45,000 in 2017/18 (rising to £46,350 for 2018/19) (note that rates are different for Scottish taxpayers). Higher rate and additional rate taxpayers are not entitled to the allowance.
- Both partners must have been born on or after 6 April 1935.
For 2017/18, the maximum amount that can be transferred from one partner to the other is £1,150, which means that the spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £230 for 2017/18 (£1,150 @ 20%).
For 2015/16 MA was worth £212, and for 2016/17, the allowance was raised to £1,100, making it worth £220. Backdated claims are possible – a claim for all three years from 2015/16 to 2017/18 inclusive will therefore be worth up to £662.
The allowance is set to rise to £1,185 on 6 April 2018, so it will be worth a further £237 in 2018/19.
As announced in the 2017 Autumn Statement (applicable from 29 November 2017), it is possible to claim MA even where one partner has died since April 2015, providing all the eligibility criteria outlined above is satisfied.
In most cases, the allowance will be given by adjusting the recipient partner’s personal tax code and the allowance will be received via the PAYE system. The partner who transferred their personal allowance will also receive a new, reduced, tax code, which will be operated against their employment income where applicable. If the recipient partner is self-employed, the allowance can be claimed via the self-assessment tax return and the allowance will be given as a reduction against their self-assessment tax liability.