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Marriage Allowance

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Recent press reports suggested that up to two million couples may be missing out on a valuable tax break – the marriage allowance.


The marriage allowance was introduced from 6 April 2015 and allows certain couples to transfer 10% of their personal allowance (£1,150 for 2017/18) to their spouse or civil partner where this would otherwise be wasted. However, there are eligibility conditions to be met.


Who qualifies?


Couples can benefit from the marriage allowance if the following apply:


• they are married or in a civil partnership;
• one spouse or civil partner has no income or their income is below the level of the personal allowance (£11,500 for 2017/18);
• their spouse or civil partner pays tax at the basic rate (so for 2017/18 they have income of between £11,501 and £45,000 (or £43,000 where the taxpayer is a Scottish taxpayer).


How to apply


An application for the marriage allowance can be made online (see www.gov.uk/apply-marriage-allowance ).


If the claim is successful, it will be backdated to the start of the 2017/18 tax year. It is also possible to claim for 2015/16 if the couple qualified but did not make a claim for that year.


Giving effect to the claim


The effect of the marriage allowance is that 10% of the personal allowance is transferred from one spouse or civil partner to the other. For 2017/18, the transferred personal allowance is £1,150 (10% of £11,500).


As a result of the transfer, the personal allowance of the person transferring 10% of their allowance is reduced by £1,150 to £10,350 and the recipient’s personal allowance is increased by £1,150 to £12,650.


Where a couple have claimed the marriage allowance, this is reflected in their tax code. The person who has made the transfer will have the suffix letter M and the person receiving the transfer will have the suffix letter N. Where there are no other adjustments to the tax code, this will result in a code of 1035M for the transferor and 1265N for the transferee.


Where the recipient is not employed, effect to the claim is given via the self-assessment tax return.


Tax saving


If the spouse or civil partner is a non-taxpayer and the recipient pays tax at the basic rate, claiming the allowance will result in a tax saving of £230 for 2017/18 (£1,150 @ 20%).


The allowance cannot be claimed if the recipient pays tax at the higher or the additional rate.


Example


Ben is a stay-at-home dad. His wife Lucy works in retail and earns £20,000 for 2017/18. Ben does not use his personal allowance, so the couple claims the marriage allowance. As a result, £1,150 of Ben’s personal allowance is transferred to Lucy and her personal allowance is increased to £12,650. As a result of making the claim, Lucy’s tax bill is reduced by £230.