Marriage Allowance – What is it?
If you are married or in a civil partnership you may be entitled to get up to £212 a year with the governments introduction of the marriage allowance.
The marriage allowance was introduced on the 6th April 2015. It allows up to 10% of a spouses or civil partners unused personal allowance to be transferred. However, as with much new legislation there are certain criteria that must be met in order to benefit from this tax break:
- You must be married or in a civil partnership
- One of you needs to be earning £10,600 or less
- The other one needs to be a basic rate tax payer (couples with a higher or additional rate tax payer are not eligible for this allowance.
- Both must have been born after the 6th April 1935.
The Government advised this new measure aims to introduce the “recognition of marriage into our tax system” and has claimed that the allowance would save more than four million married couples and 15,000 civil partners up to £212 a year.
So how does it work?
The partner who has an unused amount of personal allowance can transfer up to £1,060 (10% of the full allowance for the year 15/16) to the other. It does not matter if they have more allowance available; the limit to transfer is £1,060, this means no more and, more importantly, no less.
What is in the small print?
- A claim will remain in place whilst the eligibility criteria is met unless it is withdrawn, if it is withdrawn the allowance will only cease at the start of the new tax year not mid-year.
- If a partner who has received the transferred amount dies during the tax year, the claim remains in place and their estate will be treated as having a higher personal allowance. However, the transferor’s personal allowance will revert back to the original amount.
- If your partner transferred their personal allowance before they died, then your allowance stays at the higher rate until the end of the tax year, however, their estate will be treated with the lower amount.
- What if there is less than £1060 of unused personal allowance available? – You can still take advantage of this rule but it is a little more complicated. The individual will still have to transfer £1060 of their personal allowance, no less, even though they do not have this available. This would mean the transferor may exceed their personal allowance and would end up paying tax on the amount with which they have gone over.
- What if an individual’s circumstances change in the tax year and the transferors wage amount increases? They would have less personal allowance available than originally thought. For example their original earnings were £8000 and they had £2600 personal allowance to transfer, after transferring they are left with a personal allowance of £9540. Their earnings then increase to £10,000. The transferor is still left with a personal allowance of £9540 and would need to pay tax on the difference i.e. £460. There would still be a net benefit between the partners, just not as much.
How do you apply?
To take advantage of this legislation you will need to register at https://www.gov.uk/marriage-allowance. Eventually HMRC will email those who register with full information on how to apply. It does not matter when you apply in the tax year as you will receive the full benefit for the year.
Unfortunately HMRC have advised that it can take up to 14 weeks from registration to receive an email back.
In most cases the allowance will be given by adjusting the couple’s tax codes. However, if the recipient is in self-assessment it will reduce their self assessment bill.
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