Marriage Tax Allowance was introduced in 2015 and is available to couples who are either married or in a civil partnership, where one partner is a basic rate taxpayer and the other partner does not pay income tax (their income is below the personal allowance of £12,570).
10% of the allowance is transferred to the taxpaying partner. This is £1,260 so reduces the taxpaying partner's tax bill by £252.
Importantly, if you have not claimed the allowance - and many eligible people don't. If you're tax code isn't suffixed M or N then marriage tax allowance hasn't been claimed.
HMRC allows backdating. You can claim up to 4 tax years back from the current tax year, so right now the earliest year is 2020/2021.
As we approach the end of the 2024/2025 tax year at the end of this month, time is running out on claiming this marriage tax allowance for 2020.
- 2024/2025 - £12,570 tax free - 10 percent transferred = £1,260 tax allowance = 20% basic rate tax relief = £252 tax reduction.
- 2023/2024 - £12,570 tax free - 10 percent transferred = £1,260 tax allowance = 20% basic rate tax relief = £252 tax reduction.
- 2022/2023 - £12,570 tax free - 10 percent transferred = £1,260 tax allowance = 20% basic rate tax relief = £252 tax reduction.
- 2021/2022 - £12,570 tax free - 10 percent transferred = £1,260 tax allowance = 20% basic rate tax relief = £252 tax reduction.
- 2020/2021 - £12,500 tax free - 10 percent transferred = £1,250 tax allowance = 20% basic rate tax relief = £250 tax reduction.
Use the calculator here to see how much you could save. The transferred allowance amount varies depending on how much unused allowance there is. The tax saving will also vary depending on how much gross income the higher earning partner has. Our calculator will check this for you. Then you can head over to https://www.gov.uk/apply-marriage-allowance to make a claim directly with HMRC. You can even do it by post by using downloading and printing the form at https://www.gov.uk/guidance/apply-for-marriage-allowance-by-post.
Once you claim is approved, the taxpaying partner's tax bill will be reduced by the amount of allowance allowed - and if you're backdating for the maximum this could be up to £1,258.
At the 20 percent basic rate tax, a £1,258 reduction in a tax bill is equivalent to adding an additional £6,290 to a person's tax-free allowance. That's like getting a total tax-free allowance of £18,860 in the 2024/2025 tax year - pretty substantial considering tax allowances are frozen until 2028!.