As Brits brace for the third storm of the season to arrive, we have some good news for a certain group of people in the UK. The cost of living crisis has hit the UK hard, and many are struggling to cover costs - especially as the weather gets colder. However, if you are a married couple, it turns out that you could be able to reduce your tax bill by £252.
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This is because of the Marriage Allowance, which covers people in a civil partnership as well as married couples. This allowance lets you transfer £1,260 of your personal allowance to your husband, wife or civil partner, which can reduce their tax by up to £252 in the tax year. In the UK, the tax year runs from 6 April to 5 April the next year. Here’s how it works and who can apply.
How the Marriage Allowance works
This allowance works for couples who are made up of a higher earner and a lower earner who has an income below their Personal Allowance, which is usually £12,570. When the lower earner transfers some of their Personal Allowance to their husband, wife or civil partner they might have to pay more tax themselves, but they could still pay less as a couple.
Gov.uk gives the following examples:
- 'Your income is £11,500 and your Personal Allowance is £12,570, so you do not pay tax.
- Your partner’s income is £20,000 and their Personal Allowance is £12,570, so they pay tax on £7,430 (their ‘taxable income’). This means as a couple you are paying Income Tax on £7,430.
- When you claim Marriage Allowance you transfer £1,260 of your Personal Allowance to your partner. Your Personal Allowance becomes £11,310 and your partner gets a ‘tax credit’ on £1,260 of their taxable income.
- This means you will now pay tax on £190, but your partner will only pay tax on £6,170. As a couple you benefit, as you are only paying Income Tax on £6,360 rather than £7,430, which saves you £214 in tax.'
You can use their Marriage Allowance calculator to check how much tax you could save as a couple.
Who can apply for the Marriage Allowance
For the sake of explaining, let's say you are the lower earner in a couple. You can apply if you are married or in a civil partnership, you do not pay Income Tax or your income is below your Personal Allowance, and your partner pays Income Tax at the basic rate. This usually means that your partner’s income is between £12,571 and £50,270 before they receive Marriage Allowance. If you are in Scotland, please note that this changes: your partner must pay the starter, basic or intermediate rate, which usually means their income is between £12,571 and £43,662.
You can still apply if either you or your partner are currently receiving a pension or live abroad (as long as you get a Personal Allowance).
You can also backdate your claim for the Marriage Allowance. This covers any tax year since 5 April 2019 during which you were eligible. You or you partner’s tax bill will be reduced depending on the Personal Allowance rate for the year(s) you’re backdating.
If you want more information about this allowance, Gov.uk has a page on it that you can check out. If you receive other income such as dividends, savings or benefits from your job, then you can call the Income Tax helpline to ask about your situation.
Read more:
⋙ This is how much money you should have in your savings account
⋙ £300 cost of living payment to be issued earlier than expected - here’s when you can expect yours
⋙ You could make £1000s by reclaiming from forgotten bank accounts, here's how
Sources used:
Gov.uk: Marriage Allowance
BG News: Married couples may be able to reduce tax bill by £252 – how to check if you can save money by applying
