Marriage Allowance
Background
Introduced on 6 April 2015, the marriage allowance gives certain taxpayers the option of transferring £1,100 of their income tax personal allowance to a higher earning spouse or civil partner. The name itself is misleading as this is not an extra allowance; it is simply a transfer of 10% of one individual’s personal allowance to the other. The benefit from the transfer is received as a 20% ‘tax reducer’ available to the transferee thereby saving £220 in the current tax year.
HMRC have estimated that around 4 million couples in the UK would be able to benefit from this although only a small portion of those 4 million have actually claimed the allowance.
Details
Broadly for a couple to benefit from the allowance, in addition to being married or in a civil partnership, the lower income spouse should be a non taxpayer and the other have income of between £11,000 and £43,000.
The allowance can be claimed in one of two ways, online during the year or via the self-assessment system. If done online, the transferor should complete the form giving their details (NI Number, date of marriage etc). HMRC will then make an amendment to both taxpayers tax codes which will mean the correct allowances will be allocated to each spouse throughout the year. If the claim is made through self-assessment the allowance will be given in the tax computation once the Return is submitted.
An example of how this would work is shown below:
| 2016/17 | Mr Brown | Mrs Brown |
| Employment Income | £15,000 | £6,000 |
| Personal Allowance | (£11,000) | (£9,900) |
| Taxable Income | £4,000 | NIL |
| Tax @ 20% | £800 | NIL |
| Less Marriage Allowance Reducer (£1,100 @ 20%) | (£220) | |
| Less PAYE Deducted | (£800) | NIL |
| Tax Refund | (£220) | NIL |
As you can see in this example, by claiming the marriage allowance Mr & Mrs Brown have been able to save £220 between them. Mrs Brown wouldn’t ordinarily have paid any tax for the year but Mr Brown would have paid £800. His total tax payments for the year are now reduced to £580.
If you have any questions on the above or whether you are eligible to claim this allowance please contact our Tax Director, Jenny Marks.
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