Marriage Tax Allowance
Get a tax break worth up to £900
Are you married or in a civil partnership? If so you may be entitled to a £900 tax break called the marriage tax allowance. Yet about one million couples are still missing out. It's free money, so worth checking – and you can now qualify even if your partner has passed away.
The marriage tax allowance is a 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 Q&A on how to get it, plus some key information.
- You're married or in a civil partnership (just living together doesn't count).
- One of you needs to be a non-taxpayer, which usually just means earning less than the £11,850 personal allowance (£11,500 for 2017/18, £11,000 for 2016/17, £10,600 for 2015/16).
- The other needs to be a basic 20% rate taxpayer (higher or additional-rate taxpayers aren't eligible for this allowance). This means you'd normally need to earn less than £46,350 (£45,000 for 2017/18, £43,000 for 2016/17) or if you live in Scotland, £43,430 (£42,385 for 2015/16).
- You both must have been born on or after 6 April 1935 (if not there's another tax perk).
- Plus, a rule that came into effect from Wednesday 29 November 2017 allows you to claim even if your partner has died since April 2015 and all the other criteria above apply.
So in a nutshell one of you must be a non-taxpayer and one must be a basic-rate taxpayer.
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What's this about £900, wasn't it £662 last tax year? The marriage tax allowance started on 6 April 2015, and in year one was worth £212. For the following tax year, starting in April 2016, it was worth £220 and the year after - beginning April 2017 - it was worth £230. For this tax year – beginning April 2018 – it's worth £238. Plus claim it now and it's backdated so many get previous years' AND this year's allowance – £900.
The rest of this guide uses allowances and thresholds for the 2018/19 tax year, though as we say above you can also claim for previous tax years, with the rates and thresholds for these in the section above this.
Already applied in the last tax year? You'll automatically get the marriage tax allowance this year and only need to inform HM Revenue & Customs (HMRC) if your circumstances have changed making you no longer eligible.
You don't need to reapply if you got the marriage tax allowance last year.
Sounds promising – so how does the maths work? The partner who has an unused amount of personal allowance can transfer £1,190 of their allowance to the other (so basically 10% of the full allowance). It doesn't matter if they have £5,000 of allowance left or £500; they can only transfer £1,190.
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 £11,850, so he has plenty of spare allowance to transfer £1,190 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 £46,350 for most). Her personal allowance increases by £1,190 to £13,040 when Peter chooses to make his transfer.
So she has an extra £1,190 which she would've paid tax on at 20% but is now tax-free, so she's £238 up (20% of £1,190).
OK, so how do we actually apply? It really is very simple, and only takes a few minutes – just use the application at 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 met the criteria. So if you earned more than the £11,000 personal allowance in 2016/17, HMRC won't allow you to claim 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 immediately informed that your application has been received via email (you can apply over the phone too). If you were also eligible for the allowance in previous tax years, you'll have to select this option as part of the application process.
Although the onus is on you to check you're eligible, HMRC will write to inform you if you're not – although you may have to wait a few weeks.
Here's some of the feedback we've got on it:
Richard and Nancy: "We followed the easy procedure explained and applied to HMRC online – very simple and efficient, with instant confirmation! I'll be £220 better off this tax year with similar expectations in future tax years, plus a rebate cheque for tax year 2015/16 that I think will be £212. Brilliant! Our heartfelt thanks."
Jessica: "Me and my husband applied for marriage allowance after getting married in May. We have just received £130 and it's going towards a much-needed night out!"
Barry: "Dead easy... Really worth doing, even when retired."
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.
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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.
How do I know if I'm a non-taxpayer? In general it is simply if your taxable income between 6 April 2018 and 5 April 2019 totals £11,850 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 £11,850 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 will 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).
Ah, but what if I have less than £1,190 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 £1,190 to take advantage – nothing more, nothing less. This means if you've less than £1,190 left of your allowance, you could exceed 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 £10,900 a year. His full personal allowance for the year is £11,850, so by transferring £1,190 to his wife, he's left with a personal allowance for the year of £10,660.
Full-time Fiona still gets the full personal allowance increase of £1,190 to £13,040 when Peter chooses to make his transfer.
However, Peter now earns £240 more than his personal allowance, meaning he'll pay basic-rate tax for the year of £48. Meanwhile, Fiona gets an increase in her personal allowance of £1,190, so she'll get to keep an extra £238 (the 20% tax she would have had to pay).
The net benefit to Peter and Fiona is £190 – still worth having.
This year, the basic personal allowance for most is £11,850, 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 £10,660 (£11,850 less £1,190) will they get the full £238 basic-rate tax saving.
What if either of us is self-employed, or both of us are? 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.
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.
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, the taxpayer has flexible income or the non-taxpayer starts working.
If that happens, HMRC will not know until the end of the tax year thanks to the way tax is calculated. It doesn't matter even if the taxpayer is occasionally pushed into the higher-rate tax band, as long as their total income for the tax year doesn't exceed £46,350 (£43,430 in Scotland).
At the end of the tax year HMRC will reconcile your tax affairs, send a P800 calculation and recover any tax due in the following year through an adjustment to your tax code to claw it back via the payroll (or self-assessment for the self-employed).
What if overtime pushes us slightly above the threshold? We spoke to HMRC and it confirmed that what counts is how much you earn over the course of a tax year – so as long as the non-taxpayer earns less than £11,850 in a tax year, and the basic-rate taxpayer's total income is less than £46,350 (£43,430 in Scotland) for the same tax year, you'd be eligible.
It doesn't matter if overtime occasionally pushes you or your partner into the higher-rate tax band, as long as the basic-rate taxpayer's total income for the tax year doesn't exceed £46,350 (£43,430 in Scotland). If you do claim for the current year and end up going over the £46,350 (£43,430 in Scotland) threshold, any underpaid tax would be recovered through a tax code change the following year.
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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. If you were accepted, as above, any underpaid tax would be collected through a PAYE code adjustment.
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.
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.
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.
What happens if my partner dies after we've applied? If your partner dies after you've transferred £1,190 allowance to them, their estate will be treated as having an increased personal allowance (ie. less tax will be taken from the inheritance) 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, 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.
Can I apply if my partner has died since 2015? Yes. A rule introduced in the Autumn Budget 2017 means widows or widowers can now claim up to £899 in backdated marriage tax allowance.
So if you and your spouse were eligible for it at any time from April 2015 (when the allowance was introduced) but you didn't claim before the death of your partner, you can now apply retrospectively.
You'll be eligible (assuming you meet the criteria above) for a payment for any year in which both of you were alive – and, even if your partner died on day one of the tax year, you'd get the payout for the whole tax year. Meanwhile, it doesn't matter if the taxpayer or the non-taxpayer has died; you're eligible regardless.
HMRC says you could first apply for this from Wednesday 29 November 2017. You will need to apply over the phone, and the adviser will take you through the process. Again, you'll only be able to backdate as far as April 2015. It's likely documents you might need will include proof that a partner has passed away and evidence of income, eg, old pension statements - we'll update this guide when we've confirmed this with HMRC.
What happens if we divorce or dissolve our civil partnership? To cancel the allowance, you must contact HMRC.
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I have savings interest – can I still get the marriage tax allowance? It's all about what counts as a non-taxpayer, and it does get complicated as there's something called the tax-free savings allowance for lower incomes, which is a separate £5,000 tax-free allowance for people who just have income from savings.
The crucial part is that even if you have savings interest, as long as you're still not a taxpayer, you can still apply for and benefit from the marriage tax allowance.
I was born before 6 April 1935 – why can't I get this? That's because there's a different, better allowance available to you, that HMRC is phasing out. If one of you is over 83, you could be eligible for the married couple's (and civil partner's) allowance. This could give you a reduction on your tax bill of up to £869. However, if you're an unmarried couple (even if you're living together), you get nowt.
Although they have similar names, the married couple's allowance is completely different to the marriage tax allowance, the latter of which currently has a maximum payout of £900.
Is it ever not worth applying for? If the basic-rate taxpayer only earns a smidgeon 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 £11,600 and is a non-taxpayer. His wife Fiona earns £12,200 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 £1,190, leaving him with a personal allowance of £10,660 and bumping Fiona's personal allowance up to £13,040.
Peter now earns £930 more than his personal allowance, meaning he'll pay basic-rate tax for the year of £186. Meanwhile, the £1,190 personal-allowance increase Fiona gets means she'll get to keep an extra £70 (the 20% tax she would've had to pay on her £12,200 salary).
The net loss to Peter and Fiona is £116 – showing that in niche circumstances, couples could lose out.
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. The Government has done 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.