This blog was last updated in March 2019.
Did you know that if you’re married or in a civil partnership, you could be entitled to a tax break of up to £912? The marriage allowance could save couples hundreds, yet millions are still unaware of this tax perk.
It’s estimated that around 3.5 million couples are benefiting from the marriage allowance, but millions more who are eligible are still missing out on the tax break.
What is the marriage allowance?
The marriage allowance is a government tax initiative that started in April 2015 which allows couples to transfer some of their personal allowance to their partner if they earn less than the personal allowance. For the 2019/20 tax year the personal allowance is £12,500 per annum.
If your partner earns less than £12,500 per year, they can transfer up to £1,250 of their personal allowance to you, adding that amount to your personal allowance and saving you money on tax.
To be eligible, the higher-earner must earn between £12,501 and £50,000 (£43,430 if you’re in Scotland) before tax.
For example, if you earn £40,000 per year (as a contractor, a freelancer, or even a permanent employee), and your partner earns £8,000 a year, your partner could transfer £1,250 of their personal allowance to you, making your personal allowance £13,750. Because you would normally pay 20% tax on this extra amount, but it is tax-free through the marriage allowance, you now have £250 more (20% of £1,250) in the year.
HMRC allows couples to backdate their claim to previous tax years as far back as 2015/16, meaning eligible couples can save an additional £662 – earning a total tax saving of £912.
Are my partner and I eligible for the marriage allowance?
You can be eligible for the marriage allowance if:
- You and your partner are married or in a civil partnership
- One of you earns £12,500 or less per year and the other earns between £12,501 and £50,000
You can still apply for the allowance if you live abroad (as long as you have a personal allowance) and if one of you are receiving a pension.
The marriage allowance is an ideal tax saving option if you or your partner are a stay-at-home parent, work part-time, or undertake a freelance role for a bit of extra cash.
A situation where you wouldn’t be eligible for the allowance is if you and your partner live together with no legal marriage or civil partnership arrangement.
How do I apply for the allowance?
HMRC won’t let you know if you are eligible for the allowance, however it has an online marriage allowance calculator where you can input your and your partner’s pre-tax income to determine if you could benefit from the allowance.
You can then apply for the marriage allowance online via the government website, where you’ll be asked to provide some details in order to apply.
Only the partner who has income £12,500 per year or below may apply for the allowance, as it will be their portion which is transferred to the higher earner.
If you think you could be eligible, don’t miss out on this opportunity of an additional tax saving.
Here is more useful information to help you save money on tax: