Quick Tips: Making use of the Marriage Allowance

The Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. This reduces their tax by up to £252 in the tax year... which adds up! Talk to us about the marriage allowance. #NurtureYourKnowledge #DidYouKnow #Tax #Accounting #VAT

When you get married, you might not think about taxes, but using the Marriage Allowance can actually help you reduce your tax bill by £252. This allowance is for married couples or people in a civil partnership. To qualify, one person in the couple should earn less than the tax threshold, and the other person shouldn't pay tax at a higher rate. Common-law couples cannot apply for this allowance.

Here's how it works:

The person who earns less transfers 10% of their personal allowance to their partner. For the years 2021/22 and 2022/23, that transfer is £1,257, rounded up to £1,260. The recipient then deducts that amount from their own tax payment, potentially saving up to £252. If the lower earner's taxable income is below £11,310, they won't have to pay tax anyway, so they don't lose anything by transferring the allowance.

To claim the allowance, you can include it in your self-assessment tax return, write to HMRC, call them at 0300 200 3300, or apply online at www.gov.uk/apply-marriage-allowance. You can even claim it if you're retired or living abroad, as long as you receive a personal allowance. The claim can be backdated to the 2018/19 tax year.

However, there's a catch:

You must transfer the entire £1,260 allowance if you want to use it for a specific tax year. If you earn more than 90% of the personal allowance (£11,313) and your spouse earns less than 110% of the allowance (£13,827), claiming the allowance might actually increase your overall tax bill, making the process pointless.

While saving £252 per year might not make you rich, every penny counts. If you're eligible for the Marriage Allowance, it makes sense to claim it. As your accountant and tax advisor, we can determine if you qualify for the allowance and whether backdating it to previous tax years is an option.

Get in touch to see whether you’re eligible for the allowance and if backdating for previous tax years is also an option