Thousands of UK households are in line for a significant financial boost, with the potential to increase their tax-free income by as much as £5,040. This opportunity comes through a little-known but valuable provision from HM Revenue and Customs (HMRC) known as the Marriage Allowance.
What is the Marriage Allowance and How Does It Work?
The Marriage Allowance permits an individual to transfer a portion of their Personal Allowance to their spouse or civil partner. Specifically, you can pass on £1,260 of your tax-free allowance each tax year, which runs from 6 April to 5 April the following year.
Your Personal Allowance is the amount you can earn annually before you start paying Income Tax, which is currently set at £12,570 for most people. To benefit as a couple, the person transferring the allowance (the lower earner) must typically have an income below this Personal Allowance threshold.
This transfer can reduce the recipient partner's tax bill by up to £252 in a single tax year. While the person giving up part of their allowance might see a slight increase in their own tax, the couple's overall tax liability falls, resulting in a net gain.
Calculating Your Potential Savings
HMRC provides a clear example to illustrate the potential savings. Imagine one partner has an income of £11,500, which is below the Personal Allowance, so they pay no tax. Their partner earns £20,000 and pays tax on £7,430 (their income minus the £12,570 Personal Allowance).
By claiming the Marriage Allowance, £1,260 is transferred. The lower earner's Personal Allowance becomes £11,310, and the higher earner's taxable income is reduced to £6,170. As a couple, they now pay tax on £6,360 instead of £7,430, saving £214 in tax for the year.
If your financial situation is more complex—for instance, if you have income from dividends, savings, or benefits—HMRC advises calling the Income Tax helpline for personalised guidance.
Don't Miss Out: You Can Backdate Your Claim
A crucial aspect of this allowance is the ability to backdate claims. Eligible couples can apply for Marriage Allowance for any tax year from 6 April 2021 (the 2021/22 tax year) onwards, provided they met the criteria at that time.
By backdating over four years, the total extra tax-free allowance a couple can secure amounts to £5,040 (£1,260 x 4), potentially pushing their combined tax-free allowance above £17,000. The reduction in the partner's tax bill will be calculated based on the Personal Allowance rate applicable in each of the backdated years.
This initiative represents a substantial, yet often overlooked, financial benefit for married couples and civil partners across the UK. Checking your eligibility and making a claim could put hundreds of pounds back into your household budget.
