For 2015/16 and later tax years, the marriage allowance allows married couples and civil partners to transfer 10% of their personal allowance to their partner as long as the recipient does not pay tax at the higher or the additional rate.
To benefit from claiming marriage allowance, the lower earner must have income of less than the personal allowance (£10,600 for 2015/16 and £11,000 for 2016/17) and their partner must have income of more than the personal allowance, but not more than the level at which higher rate tax becomes payable. For 2015/16 this equates to income between £10,601 and £42,385 and for 2016/17 to income between £11,001 and £43,000.
Where the marriage allowance is claimed, 10% of the lower-earning spouse or civil partner’s personal allowance is transferred to the higher-earnings spouse or civil partner.
Note – It is only possible to transfer 10% of the allowance – not more or less.
Jessica and Josh are married and living together. Jessica is a stay-at-home mum to their daughter Elsie. Josh earns £25,000 from his job as a mechanic.
They claim the marriage allowance for 2015/16 and 2016/17.
For 2015/16 the personal allowance is £10,600. 10% of Jessica’s personal allowance (i.e. £1,060) is transferred to Josh. Her personal allowance is reduced to £9,540 (£10,600 - £1,060) and Josh’s personal allowance is increased to £11,660 (£10,600 + £1,060).
For 2016/17 the transfer is £1,100, leaving Jessica with a personal allowance of £9,900 and Josh with a personal allowance of £12,100.
What is it worth?
For 2015/16 the allowance is worth £212 and for 2016/17 it is worth £220. Claiming the allowance saves tax at the basic rate on the amount transferred. The saving equates to 2% of the personal allowance for the tax year (a tax saving of 20% on 10% of the allowance).
How to apply
Once claimed, the transfer will apply for subsequent years automatically. So, if your circumstances change and you no longer want to transfer the allowance, it must be cancelled. Again this can be done online.
Claims can be made for up to four years from the end of the tax year.
Tax code changes
Where the marriage allowance is claimed, this will be reflected in the tax codes of both parties. The recipient will have a tax code with an M suffix and, if the transferor is employed or receives a pension, their tax code will have an N suffix.
Need to know
Claiming the marriage allowance can save eligible couples tax of £220 in 2016/17.
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