Last Updated on September 1, 2023 | Published: February 4, 2022 BY Caroline Hancock FCCA
We all love to save money on tax where we can and one way to do this is through Marriage allowance tax relief but what is Marriage Allowance, who is eligible and how does it work?
Who is eligible?
Although it is called Marriage allowance, you do not have to be married to benefit. It does also apply to those in a civil partnership. But unfortunately not if you are living together but not married or in a civil partnership.
This allowance can be of benefit if your husband, wife or civil partner earns less than their personal allowance (currently £12,570) so they are not using all of their personal allowance. Which means they can potentially transfer some of their allowance to you which would save on your tax bill.
How does Marriage Allowance work?
So how does it work? Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner.
This would in essence increase their personal allowance and so reduce the amount of income they pay tax on.
As with everything, there are rules to be able to benefit. You can only apply for the Marriage Allowance if ALL of the following apply;
you are married or in a civil partnership
you do not pay Income Tax or your income is below your Personal Allowance (currently £12,570)
your partner pays Income Tax at the basic rate, (currently this means their income is between £12,571 and £50,270) before they receive Marriage Allowance.
How do I apply?
It is free to apply for the Marriage Allowance by making an application to HMRC. The person who has the lower income is the one who should apply.
If your application is successful, the changes to your personal allowances will be backdated to the start of the tax year. HMRC will give your partner the allowance you have transferred to them either by changing their tax code (this can take up to 2 months) or when they send their Self Assessment tax return.
You can backdate your claim to include any tax year since 5 April 2017 that you were eligible for Marriage Allowance. Your partner’s tax bill will be reduced depending on the Personal Allowance rate for the years you’re backdating. So if there is a year where one of you earned less than their personal allowance or did not earn at all, it would be worth checking if you are eligible to apply for that year.
Once you have applied your Personal Allowance will transfer automatically to your partner every year until you cancel the Marriage Allowance.
If you believe you are eligible and would like to apply you can do so online here.
What if my circumstances change?
You must cancel if your circumstances change. So if your relationship ends, your income changes and you are no longer eligible or if you no longer want to claim. You can cancel the Marriage Allowance online. If your relationship ends, either of you can cancel but if you are cancelling for any other reason, the person who made the claim will need to cancel.
Here at PPF we are always ready to help answer your questions and explain ways to (legally) lower your tax bill! Want to find out more? Check out our YouTube channel for our Advice & Tax Tips or get in touch to explore working with us further!
Caroline Hancock FCCA
This blog was written by Caroline Hancock, one of our Client Account Managers. To find out more about Caroline and the rest of the team, visit our team bio’s!
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