Recent government statistics have revealed that out of the 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 now could be worth up to £900!
In simple terms, 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 (£11,850 for 2018/19).
- The other partner needs to be a basic 20% rate taxpayer, which generally means they are earning less than £46,350 in 2018/19. 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 2018/19, the maximum amount that can be transferred from one partner to the other is £1,190, which means that the spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £238 for 2018/19 (£1,190 @ 20%).
It is possible to backdate claims to 2015/16, when the allowance was first introduced. For each year the allowance is worth the following amounts:
- 2015/16 – £212
- 2016/17 – £220
- 2017/18 – £230
So, a claim for all three years from 2015/16 to 2017/18 inclusive might be worth up to £662. Added to the 2018/19 allowance, could provide claimants with a reduction in their tax liability of £900.
It is also worth noting that the 2017 Autumn Statement confirmed that (with effect from 29 November 2017), it is possible to claim Marriage Allowance 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.
All in all, it will definitely be worth checking to make sure claims are made, where appropriate.
Written by the Tax Advice Network