In a significant update for married couples and civil partners, HM Revenue and Customs (HMRC) is boosting the Personal Tax-Free Allowance by 10% for individuals with the 'M' tax code, which signifies the Marriage Allowance. This initiative enables a transfer of 10% of one partner's Personal Allowance to the other, potentially reducing their overall tax burden.
Understanding the Marriage Allowance
The Marriage Allowance permits you to transfer £1,260 of your Personal Allowance—the amount you can earn before paying tax—to your husband, wife, or civil partner. This transfer can lower their tax by up to £252 during the tax year, which runs from 6 April to 5 April the following year. To qualify as a couple, the lower earner must typically have an income below the Personal Allowance threshold, currently set at £12,570.
Eligibility and Benefits
You can take advantage of the Marriage Allowance if you are married or in a civil partnership, do not pay Income Tax or earn below your Personal Allowance, and your partner pays Income Tax at the basic rate, with an income between £12,571 and £50,270 before the allowance is applied. It is important to note that cohabiting couples who are not legally married or in a civil partnership are not eligible for this benefit.
While transferring part of your Personal Allowance might increase your own tax liability, the couple as a whole could still see a reduction in their combined tax payments. HMRC provides a clear example to illustrate this: if one partner earns £11,500 and the other earns £20,000, transferring £1,260 of the allowance results in the couple paying tax on £6,360 instead of £7,430, saving them £214 in tax annually.
How to Claim and Calculate Savings
Couples can calculate their potential tax savings using online tools or by consulting HMRC resources. However, if you receive additional income from sources such as dividends, savings, or job-related benefits, or if you are unsure about your taxable income, it is recommended to contact the Income Tax helpline for personalized assistance.
This enhancement to the Personal Tax-Free Allowance underscores HMRC's commitment to supporting families through targeted tax relief measures, ensuring that eligible couples can maximize their financial well-being.
