Marriage Allowance and Married Couple’s Allowance

Marriage allowance and married couple’s allowance are two different tax treatments that can help married couples reduce their combined income tax liability. In the UK, all individuals are entitled to a personal allowance each tax year. It means that you can earn up to a certain amount without needing to pay income tax. For the tax year 2023/24, the personal allowance is £12,570. However, those who earn under the personal allowance threshold will not be able to take full advantage of this tax-free allowance as any unused amount cannot be carried forwards. Some unused personal allowance can however be transferred to a partner where you are eligible to use marriage allowance or married couple’s allowance. It can therefore be a beneficial strategy as part of wider tax planning.

How does Marriage Allowance work?

Marriage allowance works by allowing the partner who is the lower earner (earning less than the personal allowance) to transfer £1,260 of their allowance to the other partner who is earning over the personal allowance amount. The higher earning partner therefore benefits from their full personal allowance of £12,570 plus £1,260 totalling £13,830 that can be received as income tax-free.

For example, you are a married couple where the lower earner receives £10,000 in income per year. The lower earner pays no income tax but is also not using £2,570 of their personal allowance. The higher earner receives £40,000 in income per year but is only taxed on £27,430 because they are able to use their full personal allowance. At the basic rate, the higher earner will need to pay £5,486 in income tax. The combined household income for the year is therefore £44,514

Using marriage allowance, the lower earner would transfer £1,260 to the higher earner so only £26,170 would be subject to income tax. The higher earner will then need to pay £5,234 in income tax, saving £252. The combined household income for the year is £44,766.

It is important to note that that when the lower earner begins to receive income of over £11,310, marriage allowance becomes less beneficial. This is because the maximum amount that can be transferred to the higher earner is £1,260 and so the more of the personal allowance that is used up by the lower earner, the less that can be transferred to the higher earner.

How to qualify for marriage allowance

In order to be eligible to use marriage allowance, you must meet the following conditions:

• You are a married couple, or are in a civil partnership and not already receiving Married Couple’s Allowance
• Neither of you is a higher rate or additional rate income taxpayer
• One of you earns under the Personal Allowance threshold (£12,570 for the tax year 2023/24)
• You were both born after 6 April 1935 (if not, you may be eligible for Married Couple’s Allowance – see below).

How to claim marriage allowance

Marriage allowance is not applied to married couples or civil partners automatically. It needs to be applied for through HMRC. To do this you will need to provide both individual’s National Insurance numbers as well as two documents as proof of identity. Any of the following will be acceptable:

• your p60
• one of your three most recent payslips
• UK passport
• Information held on your credit file
• A copy of your self-assessment tax return from the past three years

Applying online is the simplest way to apply for marriage allowance. You’ll receive an email confirming your application within 24 hours. If you’re unable to apply online , you can apply for marriage allowance through a self-assessment tax return if you are already registered to complete them or by writing to HMRC.

Once you have claimed marriage allowance successfully, you will not have to reapply for future years. It will be automatically applied each year until your circumstance changes such as if the lower earner begins to earn over the personal allowance or the marriage or civil partnership ends.

You will notice that once you have been approved for marriage allowance your tax code will change. The tax code of the partner receiving the marriage allowance will usually change to ‘M’. This is to show they’re getting marriage allowance from their partner. If the partner who transferred their personal allowance is employed, their tax code will change to ‘N’. This shows they’ve elected to use the marriage allowance.

Can you claim for marriage allowance for previous years?

Many couples miss out on claiming for marriage allowance, usually due to lack of awareness. However, once you apply for the first time, you’ll also be given the opportunity to claim for previous years you may have been eligible. The maximum you can claim for is the past 4 years but be aware that the deadline to claim is by 5^th April each year. This means that if you were married in January 2017 and would have been eligible for marriage allowance, the latest you could claim would be 5 April 2021.

What’s the difference between marriage allowance and married couple’s allowance?

Marriage allowance is not the same as married couple’s allowance. Married couple’s allowance is only available to those where at least one spouse was born before 6 April 1935. For those married before 5 December 2005 the allowance is based on the husband’s income, however for marriages after that date, it is based on whoever is the higher earner. Unlike marriage allowance it does not reduce the amount of your taxable income, but it reduces your tax liability instead.

For the tax year 2022/23 the income threshold for calculating married couple’s allowance is £30,400. Once you exceed this, the amount you can deduct from your tax bill reduces on a sliding scale until you reach the minimum allowance. The maximum you can receive as a deduction is £912.50 whilst the minimum you can receive is £353. You will receive £353 no matter how high your income if you’re eligible for married couple’s allowance. You can use the HMRC calculator to work out if you qualify for married couple’s allowance, and how much you might get.

Although the amounts may not appear significant, we still highly recommend claiming for the tax relief if eligible. Claiming for all available tax breaks often adds up quickly. For tax planning please do get in touch via the form below for a introductory consultation.