From the tax years 2015/16 onwards, it is possible for a spouse or a Civil Partner to claim Marriage Allowance.
To understand the concept of Marriage Allowance, you should be familiar with the idea of Personal Allowance.
What is Personal Allowance?
The government allows each individual to receive a certain amount of income tax-free each year as the Personal Allowance. For the tax year 2026-27, the personal allowance is £12,570. The allowance means you won’t pay tax on the first £12,570 of your income. So, you will start paying the tax on your income above this personal allowance.
Both you and your partner get your own personal allowance.
This means, in total, £25,140 of your family income will be tax-free.
If either your or your partner’s income is less than the personal allowance, you may end up wasting this allowance. So, you can transfer some of your personal allowance to your spouse/partner and effectively you could save tax.
Marriage Allowance involves transferring the personal allowance from one spouse (civil partner) to other.
So, how exactly does a Marriage Allowance work?
The couple/civil partner can transfer a maximum of 10% of the basic personal allowance as marriage allowance. The transferable amount for the tax year 2021/22 is £1,260.
The couple or civil partners can qualify for the marriage allowance when they meet both the following criteria
- throughout the tax year in question; and
- at the time they make an election for the marriage allowance.
To transfer the allowance, an individual must:
- not be liable to income tax above the basic rate (intermediate rate if a Scottish taxpayer) after allowing for the reduction in personal allowance; and
- if a non-resident, have a hypothetical income that is less than the personal allowance to which they are entitled.
To receive the allowance, an individual must:
- be entitled to personal allowances;
- not claim the married couple’s allowance, which is often more beneficial that the marriage allowance; and
- not be liable to income tax above the basic rate (intermediate rate if a Scottish taxpayer).
When can you make an election?
The couple/civil partners must make an election for a marriage allowance within 4 years of the end of the tax year. If a couple makes an election during the relevant tax year, it takes effect for that year and continues for subsequent years unless they withdraw it or it becomes ineffective. However, if a couple makes the election after the end of the tax year, it applies only to that previous year.
From 29 November 2017, HMRC allows couples to transfer the Personal Allowance even if one spouse has died.
The surviving spouse or the deceased’s personal representatives can make claims for the year of death and earlier years, backdated to 2015/16, and can make it either by:
- the surviving spouse; or
- the personal representatives of the deceased, provided both parties were married or in a civil partnership when they were last both living.
From 6 April 2018, the Scottish recipient of a 10% personal allowance transfer from a spouse will always be entitled to a 20% tax reduction.
- You can make a Marriage Allowance election by calling HMRC’s Income Tax helpline (0300 200 3300) or applying online on HMRC’s website here.
- You can normally withdraw an election only from the tax year after you notify HMRC. However, if the marriage or civil partnership comes to an end, the election can take effect in the year that the withdrawal is notified.
- An election becomes ineffective if the recipient does not in fact obtain a tax reduction for the tax year (for example, because they have no income). This does not preclude making an election in later years.
- Hypothetical income means net income calculated on the assumptions that the individual is UK-resident and UK-domiciled and makes any appropriate claims for double tax relief. You should convert overseas income into sterling using the average exchange rate for the year ending on 31 March of the relevant tax year.
- When a couple makes a Marriage Allowance election, they must transfer the full transferable amount (£1,260 for 2021/22). This can lead to a higher overall tax bill for a couple where one spouse’s income is more than 90% of the personal allowance and the other spouse’s income is less than 110% of the personal allowance.
Examples:
1. A and B are married. A’s income is £11,500 and pays no tax because this is below the personal allowance of £12,570. B’s income is £20,000 and pays tax of £1,486 (£20,000 – £12,570 = £7,430 at 20%). A transfers £1,260 of personal allowance to B, which means A now pays tax of £38 (£11,500 – (£12,570 – £1,260) = £190 at 20%), and B now pays tax of £1,234 (£20,000 -(£12,570 + £1,260) = £6,170 at 20%). The total tax bill for the couple after the marriageallowance is £1,272 (£38 + £1,234), saving the couple £214 in tax (£1,486 – £1,272).
2. C and D are civil partners. C’s income is £11,600 and D’s income is £12,800. C’s income is below the personal allowance and so pays no tax, and D pays tax of £46 (£12,800 – £12,570 = £230 at 20%). If C transfers £1,260 of personal allowance then C’s tax bill increases to £58 (£11,600 -(£12,570 – £1,260) = £290 at 20%). D’s tax bill reduces to nil as the transfer of the personal allowance offsets the £46 tax liability. The net result is that the couple’s total tax bill is £12 more (£58 – £46).
