Saving Tax: Marriage Tax Allowance

With the cost of living set to sky rocket over the next few months, here at PaperRocket, we are going to be dedicating a few of our weekly blogs to looking at ways to ensure that you are not missing out on any allowances that you may be entitled to, that could save you money in these testing times.

This week, we will be looking at the Marriage Tax Allowance. It is estimated that around 2.4 million qualifying couples miss out on claiming the marriage tax allowance, which could be costing them up to £252/year. Are you one of them?

What is the allowance, and who is entitled to claim?

This allowance is a way for couples to transfer a proportion of their personal allowance between themselves. So, if one member of the couple is a non-taxpayer and has some of their personal allowance left over after total income, that can be transferred to the other member.

You can only apply if you meet the following criteria:

  • You are married or in a civil partnership.
  • One of you needs to be a non tax payer, i.e. earning £12,570 or less (unless you have a tax code from HMRC stating your personal allowance is different).
  • The other person needs to be a basic rate tax payer, i.e. earning between £12,571 and £50,000. If the person is a higher or additional rate tax payer, you will not be able to claim.
  • Both need to have been born after 6th April 1935.
How does it work?

The amount that can be transferred is 10% of the total personal allowance (so £1,260 for 21/22). Even if the non tax payer earns nothing and doesn’t use any of their personal allowance, the maximum they can transfer is still £1,260.

The recipient will then have the transferred amount added on to their personal allowance. This means that if the full 10% is available to be transferred, a saving of £252 can be made (20% tax that would have been paid on that additional £1,260).

What if the non taxpayer earns more than £11,310?

If the non taxpayer doesn’t have the full £1,260 left to transfer (i.e. their income is between £11,311 and £12,570) then you can still claim. However, it’s a little more complicated as the full £1,260 needs to be transferred regardless, which in turn will mean that the non tax payer will then be pushed over the personal allowance and tax will become due on the amount that they’ve gone over. However, it’s still worth doing as overall, the total tax liability for the couple will still be reduced.

I’ve only just heard about this! Have I missed out on previous years?

The great news is that this can be backdated up to 4 tax years. So, if you make a claim now, and are entitled to the full 10% transfer for each year, you will receive £1,220 tax back (allowance for tax years 17/18, 18/19, 19/20 and 20/21). But, it is worth bearing in mind that you only have until 5th April 2022 to put in your claim to backdate the four years to include 17/18. As soon as we move into the new 22/23 tax year, you will only be able to backdate to 18/19, so best not to put it off!

How do I claim?

The easiest way to do so is online here, or you can do it over the phone with HMRC on 0300 200 3300. It will need to be the non taxpayer who makes the application (as it is their personal allowance that us being transferred). There is no cut off date to make the application in the tax year, and you don’t have to apply every year- it will transfer automatically until either of you cancels it.

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