The Marriage Allowance

If you are married or in a civil partnership, find out more about transferable “marriage allowance”

Married couples and civil partners may be able to take an advantage of a transferrable tax allowance- the “Marriage allowance”.

The Marriage allowance enables individuals who are married or in a civil partnership to elect to transfer some of their personal allowance to their spouse or civil partner. The election will be of particular help to couples where one of the spouses/civil partners either has insufficient income to utilise his or her personal allowance or has income which is taxed at 0%. While another partner pays Income Tax at the basic rate (annual income is between £12,501 and £50,000 before they receive Marriage Allowance).

To benefit as a couple, the one of the individuals who is the lower earner must normally have an income below Personal Allowance – this is usually £12,570 (for the tax year 2020/2021). And the other partner pays Income Tax at the basic rate, which usually means their income is between £12,501 and £50,000 before they receive Marriage Allowance.

Marriage Allowance lets individuals transfer £1,250 (for tax year 2020/2021) of their Personal Allowance to their husband, wife or civil partner (10% of the personal allowance).

This reduces their tax by up to £250 in the tax year (6 April to 5 April the next year).

To find out how much tax you would save if you applied for Marriage Allowance this year, please use calculator available by the link Eligibility Criteria – Marriage Allowance – GOV.UK (tax.service.gov.uk)

Example

Your income is £11,500 and your Personal Allowance* is £12,500 (2020/2021), so you do not pay tax.

Your partner’s income is £20,000 and their Personal Allowance is £12,500, so they pay tax on £7,500 (their ‘taxable income’). This means as a couple you are paying Income Tax on £7,500.

When you claim Marriage Allowance you transfer £1,250 of your Personal Allowance to your partner. Your Personal Allowance becomes £11,250 and your partner gets a ‘tax credit’ on £1,250 of their taxable income.

This means you will now pay tax on £250, but your partner will only pay tax on £6,250. As a couple you benefit, as you are only paying Income Tax on £6,500 rather than £7,500, which saves you £200 in tax.

To find out more information, please contact sales@sterling-beanland.co.uk.

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*The personal allowance is the amount of money that you can earn in a tax year (in the UK) without having to pay tax on your earnings, or before you start to pay tax on earnings above that level.

The Personal Allowance for the 2020/21 tax year is £12,500. However, if you receive over £100k of income then you will lose your Personal Allowance at a rate of £1 for every £2 that you earn.