Many married couples may not know that they could lower their tax bills thanks to a special tax break introduced by then prime minister David Cameron in 2015.
If you are married or in a civil partnership the Married Couple’s Allowance could reduce your annual tax bill by £252.
Firstly, here’s an explanation of some terms that are going to be mentioned a few times…
- Your personal tax allowance is the amount you can earn each tax year before you start paying income tax
- For most people the annual personal allowance is £12,570 – this is known as the basic income tax threshold
- Basic rate taxpayers are those individuals who earn less than £50,270, or £43,662 in Scotland.
With these definitions in mind, the marriage allowance works by allowing an individual who earns less than the basic income tax threshold of £12,570 to transfer some of their tax allowance to their higher earning partner, as long as they are a basic rate taxpayer and earn less than £50,270.
Up to £1,260 of your tax allowance can be transferred to your husband/wife or civil partner, to reduce their annual tax bill.
Here’s a simple example:
Your annual income is £8,500, meaning you do not pay income tax. Your partner earns £20,000. You both have the standard personal tax allowance of £12,570.
This means that your partner pays 20% income tax on £7,430 of their income.
After claiming the marriage allowance, £1,260 of your tax allowance is transferred to your partner. This means that they now have a total personal allowance of £13,830, meaning they would now pay 20% income tax on £6,170.
This saves them £252.
It is worth noting that if you earn less than £12,570 but more than £11,310 (your personal allowance minus the £1,260 transferrable amount), you may end up paying some tax yourself if you transfer the marriage allowance – but you would still save money as a couple.
What if I’ve only just learnt that I can get it?
Don’t worry if you have only just realised that you are eligible to claim the marriage allowance, don’t worry. A claim can be backdated to include any tax year since 5 April 2019.
Your partner’s tax bill will be lowered depending on their tax allowance rate for the years you’re backdating.
If your partner has died since then, you can still claim the allowance.
You can apply for the marriage allowance on the government website.