Marriage Allowance

Why are so many couples missing out on Marriage Allowance?

Earn a potential rebate of £1,256 without even lifting a finger.

It’s estimated that 2.4 million couples qualify for Marriage Allowance. Despite qualifying, these couples have yet to claim this free tax refund as HMRC doesn’t make too much noise about it! This makes it one of the most underutilised tax allowances because – unlike many other allowances – it has to be applied for and is not an automatic action. Surprisingly this simple obstacle has caused millions to turn a blind eye – but you needn’t be among them.

Here at Birkett & Co, we offer candid communication combined with industry-leading financial advice.

We have dealt with clients who have deliberated on whether or not they thought they were eligible for Marriage Allowance. Clients who feared they would be committing tax fraud if they applied for it and were not qualified – and that’s where we come in. We’ll run through the process, ask you some questions and ascertain whether you are eligible. There’s no penalty either. If you’re eligible, you get it; if you’re not, you won’t. It’s that simple.

There are at least 2.4 million people out there missing out on reducing their income tax bill by up to £252 every tax year.

We love to see our clients benefiting from unexpected tax refunds, and – as noted above – Marriage Allowance is far and away one of the most overlooked. What’s more, you can backdate claims for any of the four previous tax years – which could be worth up to £968. Without lifting a finger, you could earn a potential rebate of £1,256. Despite this, couples try and find every excuse in the book for why they’re not eligible, the most prominent being that they work. To those couples, we say this:

⬛ | It is okay if you work as long as you’re a non-taxpayer.
⬛ | If you’re a volunteer, it’s fine as long as you’re a non-taxpayer.
⬛ | If you don’t work, it’s fine as long as you’re a non-taxpayer.

We’ll explain more about how it works in the next section.

The benefits of marriage allowance

  • Marriage allowance is free to apply for via GOV.UK
  • Receive extra money back in your pocket each month
  • The financial support could really help your household bills
  • You can backdate claims for any of the four previous tax years
  • You can still claim if your husband, wife or civil partner has died

How does Marriage Allowance work?

Better still, what is it worth to my household?

Applying for Marriage Allowance is a straightforward process you can do online by visiting the GOV website. Alternatively, we can guide you through the process in person and ensure you answer things correctly. The online GOV portal will take you to a page where you fill in a form and prove your identity with something like a passport, wage slips or a p60. There is a list of all the things that you need online. Once you have those things, you can click the button, answer the questions and we’ll send that form off.

It can take a couple of months for your tax code to change to reflect this. However, you should soon notice a change on your payslips, once it does.

If you’re the person giving the allowance away, you will see an M at the end of your tax code. If you’re the person that is receiving the additional allowance, you will have an N at the end. Once that’s happened, everything will be set up. Better still, it’s also possible to backdate your claim to the 6th of April 2018. Obviously, it would be best if you had qualified within those years. For example, if you’re now on maternity leave or stay at home to look after kids, your income will have only dropped in the last year or so. Therefore, you can claim for the years that you qualify for it. However, you can’t backdate it when you were both above the threshold.

Tax Year Marriage Allowance Amount

2022 to 2023 | £252
2021 to 2022 | £252
2020 to 2021 | £250
2019 to 2020 | £250
2018 to 2019 | £238

In short, here’s what you need to qualify for Marriage Allowance . . .

⬛ | You need to be in a marriage or a civil partnership
⬛ | You need to earn between £12,500-50,000 per tax share
⬛ | Your partner must earn £12,500 or less in the same tax share
⬛ | The lower earner transfers 10% of their personal allowance to the higher earner
⬛ | This results in up to roughly £250 tax rebate per year

Sound Familiar?

  • Jack and Sarah are married. Jack works part-time as a bartender, where he earns £10,000 a year. As this is below the standard personal allowance of £12,570, Jack doesn't pay any income tax.
  • Sarah has a full-time job as a teacher with an annual salary of £25,000. Unlike Jack, she earns more than the £12,570 personal allowance but less than the £50,270 threshold for the 40% higher rate. Therefore, Sarah pays income tax at the basic rate of 20%.
  • Using Marriage Allowance, Jack transfers £1,260 of his unused tax-free allowance to Susan, pushing her personal allowance up to £13,830. This results in £1,260 tax-free earnings, meaning she pays £252 less tax - benefitting both of them.

What is marriage allowance?

Your household can pay a little bit less tax.

Marriage Allowance was set up a few years ago and is one of those things that goes away and returns. Essentially, it’s the Government encouraging and rewarding marriage through the tax system. You can make your own judgment, but this is how Marriage Allowance works. It’s one of several ways people on low incomes can potentially save money on their taxes. To be eligible, you must be married or have a civil partner; living together doesn’t count. To qualify for Marriage Allowance, one person in the relationship must earn below the personal allowance. Your personal allowance is the amount of money that you can make before you start paying income tax. Essentially, one of you has to be a non-taxpayer; the other has to be a basic 20% rate taxpayer. The current tax year (2022-23) is currently at £12,570, which is how much you make before you start paying tax. So, let’s say you’re earning £11,500. That means you’ve got £1,000 of personal allowance that you’re not using. What you can then do is allow your partner to earn an extra £1,000 before they have to start paying tax. This means that, while you might end up paying higher tax, your partner will get a tax credit – meaning you both benefit from saving money on income tax.

Marriage Allowance works well when you have one person that’s BELOW the threshold and one who is ABOVE it.

If you’re in a position where you can transfer the full £1,256 to your partner, this could save you £252, but you don’t need to share the whole thing. So, if you only earned £500 below the threshold, you can transfer that, and they can benefit from £100 less tax paid. There is a catch, however, as you need to be married or in a civil partnership. The person who has the extra allowance has to transfer it to the person who does not. The person with the additional allowance typically has to earn below £12,570 to make it worthwhile. Technically, you can do it if they’re not, but there’s no real advantage of doing it. One person needs to be earning below that threshold amount.

On the other hand, your partner has to earn over that amount and needs to be a basic rate taxpayer.

This means they need to make between £12,570 and £50,270. They won’t qualify for this allowance transfer if it goes over that. You can do this if you are earning income from a pension. If you are making below the threshold amount, you can transfer your allowance to your partner even if you’re getting money from a pension. Ultimately, it comes down to whether you meet that threshold for paying tax to end up paying less tax. Couples can even backdate their application for the previous four tax years. In doing so, they can receive a tax refund which could really help towards daily living costs such as household bills. The idea behind Marriage Allowance was to ensure that, as a couple – and as a household – you pay a little bit less tax. It’s also there to encourage people to get married. Now, whether that’s an old-fashioned idea or not, you might as well get married if you can benefit from the system.

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