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60 seconds Marriage tax allowance: Get a tax break worth up to £432

Sam | Edited by Martin

Updated May 2016

Are you married or in a civil partnership? If so you may be entitled to a £432 tax break called the marriage tax allowance. Yet 3.6 million of the 4.2 million eligible couples are still missing out. It's free money, so worth checking.

The marriage tax allowance is a still little-known way for couples to transfer a proportion of their personal allowance (the amount you can earn tax-free each tax year) between them. Here's our quick Q&A on how to get it, plus some key information.

Q. Who can get it? This is the most important factor as only people with these specific circumstances will be able to apply:

  • You're married or in a civil partnership (just living together doesn't count).
  • Both parties need to be born on or after 6 April 1935.
  • One of you needs to be a non-taxpayer, which usually just means earning less than the £11,000 personal allowance (£10,600 for 2015/16).
  • The other one of you needs to be a basic 20% rate taxpayer (couples with a higher- or additional-rate taxpayer aren't eligible for this allowance). This means you'd normally need to earn less than £43,000 (£42,385 for 2015/16)
  • Both of you must have been born after 6 April 1935 (if not there's another tax perk).

So in a nutshell one of you must be a non-taxpayer and one of you must be a basic-rate taxpayer.

Q. What's this about £432, haven't you always said £212? The marriage tax allowance started on 6 April 2015, and in year 1 was worth £212. For the new tax year starting today, it's worth £220. Plus claim it now and it's backdated so many get last year's AND this year's allowance - £432.

The rest of this guide uses allowances and thresholds for the 2016/17 tax year, though as we say above you can also claim for the 2015/16 tax year, with the rates and thresholds for that year in the section above this.

Q. Sounds promising – so how does the maths work? The partner who has an unused amount of personal allowance can transfer £1,100 of their allowance to the other (so basically 10% of the full allowance). It doesn't matter if they have £5,000 of their allowance left unused or £500; they can only transfer £1,100.

This is how it works:

Part-time Peter works just enough and earns £5,000 at his local fish and chip shop. His full personal allowance for the year is £11,000, so he has plenty of spare allowance to transfer £1,100 to his wife.

Peter's wife, full-time Fiona, is a software developer. She earns £35,000 and is a basic-rate taxpayer (higher-rate tax starts at £43,000 for most). Her personal allowance increases by £1,100 to £12,100 when Peter chooses to make his transfer.

So she has an extra £1,100 which she would've paid tax on at 20% but is now tax-free, so she's £220 up (20% of £1,100).

Q. OK, so how do we actually apply? It really is very simple, and only takes a few minutes; just use the application at HM Revenue & Customs (HMRC). To do it you'll need both your National Insurance numbers, and one of a range of different acceptable forms of ID for the non-taxpayer.

If there's a problem doing it via the web just call 0300 200 3300 and do it by phone.

It's worth noting you can also only apply for those years in which you both meet the criteria. So if you earned more than the £10,600 personal allowance in 2015/16, HMRC won't allow you to claim for it.

There is one very important point to make though...

It's the non-taxpayer who must apply to transfer their allowance.

If the taxpayer applies you're doing it the wrong way round and it won't work.

After going through the application process you'll be notified immediately if you're eligible for the allowance via email (you can apply over the phone too). If you were also eligible for the allowance in the 2015/16 tax year, you'll have to select this option as part of the application process.

Here are just a few of the tweets we've got on it:

Corinne: "Just contacted HMRC and transferred my marriage allowance to my husband. Easy! £212/year better off. Thanks."

Maureen: "Did it this morning, took a couple of minutes. Easy peasy..."

Michael: "Did this last month, easy and already received a tax rebate."

In most cases, the allowance will be given by adjusting the recipient partner's personal tax code. The partner who transferred their personal allowance will also receive a new tax code, if employed. If the recipient partner is in self-assessment, it will reduce their self-assessment bill.

Q. How will I be paid the backdated money? Whether you apply online or by phone, any money for previous tax years will be sent to you as a cheque. You won't have to tick any boxes or make a special request for this as it'll happen automatically.

Q. How do I know if I'm a non-taxpayer? In general it is simply if your taxable income between 6 April 2016 and 5 April 2017 totals £11,000 or less, then for the purposes of the marriage tax allowance, you're a non-taxpayer.

You might be on maternity leave, self-employed, a volunteer, working part-time, unemployed, working full-time, not working because of health issues, or retired – it doesn't matter. If you earn under £11,000 in the year you almost certainly qualify.

Now there are exceptions – but these are niche, so don't get bogged down by them. In rare circumstances, your personal allowance (the amount you can earn tax-free) is different – your tax code letter would tell you – such as because you have a company car. Or you may have savings interest which takes you over the threshold (see savings interest explained).

Q. Ah, but what if I have less than £1,100 of unused personal allowance – can I still take advantage? Yes, you can, but it's a bit more complicated. This is because you have to transfer £1,100 to take advantage – nothing more, nothing less. This means that if you've less than £1,100 left of your allowance, you could see yourself exceeding your personal allowance. If that happens, you'd end up paying tax on the amount you've gone over. There will still be a net gain for the two of you, just not that much.

This is how it works:

Part-time Peter decides to put in a few extra shifts at the chippy and his earnings go up to £10,500 a year. His full personal allowance for the year is £11,000, so by transferring £1,100 to his wife, he's left with a personal allowance for the year of £9,900.

Full-time Fiona still gets the full personal allowance increase of £1,100 to £12,100 when Peter chooses to make his transfer.

However, Peter now earns £600 more than his personal allowance, meaning he'll pay basic-rate tax for the year of £120. Meanwhile, Fiona gets an increase in her personal allowance of £1,100, so she'll get to keep an extra £220 (the 20% tax she would have had to pay).

The net benefit to Peter and Fiona is £100 – still worth having.

This year, the basic personal allowance for most is £11,000, meaning that's how much you can earn in the tax year before paying tax. So only if the lower earner in the couple earns less than £9,900 (£11,000 less £1,100) will they get the full £220 basic-rate tax saving.

Q. What if either or both of us are self-employed? It doesn't matter. As long as you fulfil the eligibility criteria above, you can apply. The only difference is if the recipient partner is in self-assessment, it will reduce their self-assessment bill.

Q. I'm having difficulties applying online – what can I do? Some people have reported difficulties applying online. If this is you, call HMRC on 0300 200 3300 for help.

Q. What happens if we've applied and then cease to be eligible midway through the tax year? For example, the taxpayer gets a pay rise which makes them higher rate for the year, or the non-taxpayer starts working.

If that happens HMRC will know (you don't need to tell them) and alter your tax code to claw it back via the payroll (or self assessment for the self employed).

Q. What if I've applied in error – will I be fined? Although it's highly unlikely your application would be accepted if you weren't eligible, you still won't be fined. As above, the underpaid tax would be collected through a PAYE code adjustment.

Q. Is there a cut-off date to apply? No, when you're applying for the current year, it's paid via changing your tax code over the remaining months of the tax year.

Q. Can it be backdated? Yes, you will be allowed to claim back up to four years, but it only started in April 2015, so you can't go beyond that.

Q. Do we have to apply every year? No. Your personal allowance will transfer automatically to your partner every year until one of you cancels the marriage allowance or you inform HMRC that your circumstances have changed, eg, because of divorce, employment pushing you into a higher rate tax threshold, or death.

Q. What happens if my partner dies? If your partner dies after you've transferred £1,100 to them, their estate will be treated as having an increased personal allowance while your own personal allowance will revert back to what it was before the transfer.

If your partner transferred some of their personal allowance to you before they died, then your own personal allowance will stay at the higher level until the end of the tax year while their estate will be treated as having the lower amount.

Q. What happens if we divorce or dissolve our civil partnership? Assuming you want to cancel the allowance, then you must contact HMRC.

Q. I’ve seen on the government website it says you can't get the marriage tax allowance if you have over £5,000 of savings interest? That's not true. We've had a few people ask us this question – if this is you, you're probably misreading the situation.

It comes from this question on the apply section of the HMRC website:

"Is your annual income £11,000 or less? (don't include savings interest under £5,000)."

It's all about what counts as a non-taxpayer, and it does get a little complicated as it's all due to something called the tax-free savings allowance for lower incomes. That means you can earn £11,000 under your personal allowance and then have £5,000 of savings interest tax-free and still not pay tax on it.

So in that circumstance you could actually earn more than £11,000 in total income and interest, and still count as a non-taxpayer. This question is just a slightly cumbersome way of saying that.

Q. I was born before 6 April 1935 – why can't I get this? This is because there's a different, better allowance available to you, that HMRC is phasing out. If one of you is over 81, then you could be eligible for the married couple's (& civil partner's) allowance. This could give you a reduction on your tax bill of up to £835. However, if you're an unmarried couple (even if you're living together), then you get nowt.

Q. Is it ever not worth it it to apply?
If the basic-rate taxpayer only earns a smidgen above the personal allowance and the non-taxpayer just below it then it may not be beneficial. Here's a quick example to show why:

Peter earns £10,800 and is a non-taxpayer while his wife Fiona earns £11,500 and is a basic-rate taxpayer. If Peter decides to transfer some of his personal allowance to Fiona he'll have no choice but to transfer the full £1,100 leaving him with a personal allowance of £9,900 and bumping Fiona's personal allowance up to £12,100.

Peter now earns £900 more than his personal allowance, meaning he'll pay basic-rate tax for the year of £180. Meanwhile, the increase Fiona gets in her personal allowance of £1,100, means she'll get to keep an extra £80 (the 20% tax she would have had to pay on her salary of £11,500).

The net loss to Peter and Fiona is £100 – showing that in very niche circumstances, couples could lose out.

Q. Isn't this discriminatory against people who aren't married, or who earn more? Quite simply yes. This is a government policy to reward the institution of marriage. It does it because it believes that provides a more stable family.

The fact it's a transfer from the non-taxpayer to an earner also indicates a concept of rewarding the perhaps more old-fashioned "one parent stays at home"-type set-up.