With the cost of living crisis increasing inflation by an average of 6% this year and households expected to pay an additional £693 a year on energy bills, it's likely that making the most of your income is a big priority for you.
Now more than ever, it is frustrating to see deductions made from your earnings in the form of Income Tax and National Insurance. Thankfully there are various types of tax relief available that can alleviate a percentage of the tax you are required to pay.
In this article, we will be focussing on the Married Tax Allowance which provides tax relief for married couples and civil partners by reducing their tax bill by up to £252 in the tax year. However, despite this allowance, around 2.4 million couples are missing out on the tax relief which can provide a payout of up to £1,242 if the allowance is backdated.
So if you are married or in a civil partnership, this guide is for you. We are going to cover everything you need to know about the Marriage Tax Allowance including eligibility, the amount of tax relief you can claim, and how to apply for the allowance and backdate. Additionally, we've answered some frequently asked queries about the Marriage Tax Allowance to make sure you know what you are entitled to. Let's jump straight in!
The Marriage Tax Allowance is tax relief available to married or civil partnership couples. It allows a low-earning partner to transfer a percentage of their Personal Tax Allowance to their partner, resulting in a reduction in their tax bill.
To benefit from the Marriage Allowance as a married or civil partnership couple, one of you must normally have an income below £12,570. This is your Personal Allowance for the current tax year and it means any earnings below this amount are not taxable.
The Marriage Tax Allowance allows you to transfer £1,260 of your Personal Allowance to your partner if they earn more than you — this equates to around 10% of your allowance. The transfer can save them up to £252 in the current tax year by decreasing their taxable income.
For example, if you earn £10,000 a year and your partner earns £30,000, you earn less than the Personal Allowance (£12,570) and are a non-taxpayer and your partner is a basic-rate taxpayer. You will be able to transfer £1,260 of your allowance to your partner which will reduce your tax-free allowance to £11,310. You will, however, still remain a non-taxpayer as your earnings are below this new allowance threshold.
Before the transfer, your partner's tax bill would be calculated by taking the allowance of £12,570 from their earnings of £30,000 and they would pay Income Tax on the remaining amount of £17,430 at the basic rate of 20%. This means their tax bill would be £3,486.
However, when you transfer the £1,260 your allowance to your partner, it increased theirs to £13,830. As a result, their new tax bill will be £3234 as they pay tax at a rate of 20% on the difference between their salary of £30,000 and their new allowance — the difference being £16,170. Overall, claiming the Marriage Tax Allowance means they make a saving of £252 on their tax bill.
The Marriage Tax allowance for the current 2022 to 2023 tax year means you can get a tax relief worth up to £252. Additionally, you can claim the allowance for the previous four years which means you can get the following amounts as well:
- 2021/22 – £252
- 2020/21 – £250
- 2019/20 – £250
- 2018/19 – £238
For the current tax year, you will not receive actual payment for the allowance, but you will pay less tax on your earnings.
If you are employed this is done through the Pay As You Earn (PAYE) system run by your employer. You will be assigned a new tax code when you claim the allowance which your employer will then use to calculate the amount of tax you will now pay. It usually takes a couple of days to get a new tax code.
If you are self-employed then HM Revenue & Customs (HMRC) will reduce your self-assessment tax bill to account for the increased Personal Allowance.
If you are backdating the allowance for previous years, you will receive a payout instead. You can choose to receive it by cheque or bank transfer and it will usually take around two weeks for HMRC to process your claim and get your payout.
In order to be eligible for the Married Tax Allowance, all of the following must apply:
- You are married or in a civil partnership (simply living together does not count)
- Your income is below the Personal Allowance threshold of £12,570 or you do not usually pay Income Tax
- Your partner is a basic-rate taxpayer who earns between £12,571 and £50,270 (between £12,571 and £43,662 in Scotland) before tax
You will still be eligible for the allowance if you or your partner currently receives a pension or live abroad and get a Personal Allowance.
If you or your partner were born before 6 April 1935, you may benefit more from a different allowance called the Married Couple's Allowance instead.
Married Couple's Allowance
The Married Couple's Allowance is another form of tax relief that can reduce your tax bill by between £364 and £941.50 for the current tax year.
The allowance is available to couples where all of the following apply:
- You are married or in a civil partnership
- You live with your spouse or civil partner
- One of you was born before 6 April 1935
There are two ways to claim this allowance:
- If you complete Self Assessment: Complete the Married Couple's Allowance section in your Self Assessment tax return, or
- If you do not complete Self Assessment: Contact HMRC and provide details of your marriage or civil partnership and provide details about your partner including their date of birth
The quickest method is to apply for Marriage Allowance online using your National Insurance Number and one of the following ways to prove your identity:
- Your P60
- A recent payslip (one of the last three)
- UK passport details
- Information on your credit file
- Information from your Self Assessment tax return (within the last three years)
- Your driving licence (Northern Ireland)
You can also apply through Self Assessment if you are already registered, or by writing to HMRC.
Once you have applied and successfully claimed the Marriage Allowance, you do not need to reapply each year as it is automatically added for you. You will need to monitor any changes in your circumstances and cancel the allowance if you are no longer eligible to claim it — we have covered this in the FAQs below under 'What do I do if my circumstances change?'
We've covered some frequently asked questions to make sure you have everything you need to know about the Marriage Allowance before you decide if it is worth claiming.
Can the Marriage Allowance be backdated?
Yes, as previously mentioned the allowance can be backdated by up to four years. Therefore, if you successfully claim Marriage Allowance for the current tax year and the previous four years, you will receive a payout of up to £1,242. This is the sum of the current allowance for 2022 to 2023 which is £252 and the previous four year's allowances mentioned earlier.
Will the Marriage Allowance change my tax code?
Yes, your tax code will usually change after a successful Marriage Allowance claim. Your new tax code will reflect the transferred allowance and the tax code will end with:
- 'M' if you are the individual receiving the allowance, or
- 'N' if you are the individual who has transferred their allowance
What happens if I start earning over the Personal Allowance threshold?
If you are the lower-earning partner and you earn more income than usual throughout the year which results in your earnings rising above the Personal Allowance threshold of £12,570, you will need to pay tax on any earnings above the threshold. HMRC will usually send a P800 at the end of the tax year which will tell you how much you owe and you can then pay your tax bill online.
Can I claim the Marriage Allowance if I am not working or self-employed?
Yes, if you are not working or self-employed you can still transfer 10% of your Personal Allowance to your partner. If you are not working, your partner must be earning and be a basic-rate taxpayer — this means they earn between £12,571 to £50,270.
If you, your partner or both of you are self-employed, you are also able to transfer your allowance provided one of you earns less than £12,570 and the other earns between £12,571 and £50,270. Individuals who are self-employed will have to complete a Self Assessment tax return and their Marriage Allowance will reduce their tax bill.
What do I do if my circumstances change?
Once you have successfully made a Marriage Allowance claim, your Personal Allowance will be transferred to your partner until you cancel it.
You must cancel if any of the following apply:
- Your relationship ends because you have divorced your partner, become legally separated, or you have 'dissolved' your civil partnership
- Your income changes and you are no longer eligible to claim Marriage Allowance
- You do not want to claim the allowance any longer
You can cancel the Marriage Allowance online using your Government Gateway ID or call one of the following enquiry numbers:
- Telephone: 0300 200 3300
- Telephone from outside the UK: +44 135 535 9022
If the relationship has ended, either of you can cancel the allowance claim, but if you need to cancel for another reason then the person who made the claim must cancel it. Once you have successfully done this, your allowance will run until the end of the tax year which is 5 April.
What happens if my partner dies?
If your partner dies after you have given them part of your Personal Allowance, their estate will be counted as having an increased Personal Allowance and yours will go back to the normal amount. For example, if you transferred £1,260 to your partner then after their death your allowance would increase from £11,310 to the standard amount of £12,570. Their estate's allowance would remain at £13,830.
Alternatively, if your partner transferred their allowance to you before they died then your allowance will stay at the increased amount until the end of the current tax year (5 April) and their estate would be considered to have a reduced allowance. So, if your partner transferred £1,260 then your allowance would stay at £13,310 until 5 April and then return to £12,570. Your partner's estate would have a Personal Allowance of £11,310.
If your partner has died since 5 April 2017, you can still claim the allowance and backdate it to 5 April 2018. To do this, you will need to contact the HMRC Income Tax helpline.
Can I claim the Marriage Allowance if I am on maternity leave?
Yes, you can claim the allowance and transfer 10% of your Personal Allowance to your partner if you are on maternity leave provided you earn less than the threshold of £12,570.