There are 2 types of allowances available to married couples which could potentially reduce your tax bill. This post explains each of these allowances and how they work.
The type of marriage allowance that you may be eligible for depends on the age of you and your partner. Married couples and civil partners who were born after 6 April 1935 are eligible to register for Marriage Allowance. This scheme enables couples to shift unused tax allowances between each another in order to reduce their tax liability.
If you are married or in a civil partnership and one of you is born before 6 April 1935, you may be able to claim Marriage Couples Allowance instead.
Who Can Claim Marriage Allowance?
You can claim Marriage Allowance if all of the following apply to you:
- You’re married or in a civil partnership
- Your annual income is £10,600 or less (plus up to £5,000 tax-free savings interest)
- Your partner’s annual income is between £10,600 and £42,385
- You were both born on or after 6 April 1935
How Does Marriage Allowance Work?
In the 2015/16 tax year, £1,060 of your Personal Allowance can be transferred to your spouse or civil partner if you’re both eligible. This transfer is intended to increase their Personal Allowance (reducing yours) in order to reduce the amount of Income Tax payable.
If you earn £10,000, you can transfer the remaining £600 of your Personal Allowance to your partner*, making them a saving of £120 a year (20% of £600).
*Providing that they’re a basic rate taxpayer.
When you have registered for Marriage Allowance, HMRC will change your partners tax code (usually to 1166M) or change their allowance when they send in Self-Assessment if they are self-employed.
Who Can Claim Married Couples Allowance?
Married Couples Allowance could potentially reduce your tax bill by between £322 and £835.50 a year. Those who are eligible to benefit from this scheme include those who are married or in a civil partnership where one or both of the couple was born before 6 April 1935.
Married Couples Allowance can still be claimed if you’re unable to live with your partner as a result of illness or old age. It can also be claimed if they’re away from home as a result of work, education, training, or if they’re in prison.
How Does Married Couples Allowance Work?
Married Couples Allowance is partly a means-tested allowance. As opposed to increasing the amount of income that is receivable before tax, it instead reduces your tax bill by 10% of the allowance that you’re entitled to. For the 2015/16 tax year Married Couples Allowance is £8,355.
As Married Couples Allowance is age-restricted and consists of varying limits, those who are entitled should use HMRCs Married Couple’s Allowance calculator in order to determine their eligibility.
Other Tax Reliefs
It is important that you claim all tax reliefs available to you in order to ensure you don’t pay more tax than you need to. You can use our free tax refund calculator to see if you can claim any additional allowances based on your job – it takes just a few minutes to check! To find out more about other reliefs available to employees, have a look at our Tax Rebate Services.