Unlike the personal tax allowance which everyone is entitled to automatically at each new tax year, there are some additional allowances that can be claimed, if you are eligible, in order to further save on tax payments.
For married couples or those in civil partnerships, you may be able to take advantage of Marriage Allowance if you meet certain criteria:
- You are married or in a civil partnership and do not receive Married Couple’s Allowance
- Neither of you is a higher rate or additional rate income tax payer
- One of you earns under the Personal Allowance threshold (£12,570 for the tax year 2021/22)
- You were both born after 6 April 1935 (if not, you may be eligible for Married Couple’s Allowance – see below).
If you qualify by satisfying all of the conditions listed above then you are able to transfer 10% of your personal tax allowance to your partner. In practice this means that the person who earns under the personal allowance threshold is able to pass on 10% to their partner. For the tax year 2021/22 the amount you can transfer is £1,260 and your partner would then have £13,830 as a tax free allowance for the year.
Couples that will benefit from Marriage Allowance are those where one person does not work or only works part-time, perhaps to care for children or relatives. Should the person who earns under the personal allowance threshold receive an income of at least £11,310 (the difference between the personal allowance minus the 10% which you transfer to your partner) then it is important to note than any amount earned above this will be taxed at the basic income tax rate of 20%.
To claim you will need to apply on HMRC’s website and provide both your National Insurance numbers as well as proof of identity. Millions of couples miss out on claiming for marriage allowance, however it is possible to backdate your claim by up to four years. Money owed from previous years will be paid to you via a cheque. The allowance is adjusted via your tax code and does not have to be reapplied for in the following year. The personal allowance transfer will automatically happen each year until one of you cancels or your circumstances change such as by divorce, death of a spouse or receiving higher income so that you are no longer entitled to receive marriage allowance.
Married Couple’s Allowance
Marriage Allowance is not the same as married couple’s allowance. Married couple’s allowance is only available to those where at least one spouse was born before 6 April 1935. For those married before 5 December 2005 the allowance is based on the husband’s income, however for marriages after that date, it is based on whoever is the higher earner. Unlike marriage allowance it does not reduce the amount of your taxable income, but it reduces your tax liability instead.
For the tax year 2021/22 the income threshold for calculating Married Couple’s Allowance is £29,600. Once you exceed this, the amount you can deduct from your tax bill reduces on a sliding scale until you reach the minimum allowance. The maximum you can receive as a deduction is £891.50 whilst the minimum you can receive is £345. You will receive £345 no matter how high your income if you’re eligible for married couple’s allowance. To calculate how much you can reduce your tax liability by you can use the HMRC calculator.
Although the amounts may not appear significant, we still highly recommend claiming for the tax relief if eligible. Claiming for all available tax breaks often adds up quickly. For tax planning please do get in touch via the form below for a free introductory consultation.