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New Marriage Tax Break - What Does It Mean For You?

From April this year, millions of married couples and civil partners will be able to claim a new allowance which could reduce their joint tax bill. HM Revenue & Customs are now accepting registrations for this new Marriage Allowance which could reduce a couple’s tax bill by up to £212 per year. Solicitor Sarah-Jane Macdonald covers what the new allowance is, and what it could mean for you in practice.


What does the Allowance Do?
If one spouse or civil partner in a couple is earning below the basic rate threshold of income tax, or Personal Allowance (£10,600), they can elect to transfer up to 10% of this threshold (£1,060) to their spouse or partner. 

What is the Benefit?
In the following example, if one spouse or civil partner is paying tax at the basic rate on earnings of £20,000 per year, they will be paying tax at 20% on all earnings over the £10,600 Personal Allowance.  If their partner is below the basic rate threshold, then he or she could apply for the Marriage Allowance and transfer up to £1,060 to extend their partner’s threshold.  Therefore, the partner would only pay tax at 20% on their earnings over £11,660. 

As there won’t be tax paid on that additional £1,060 each year, the married couple or civil partners would save up to £212 each year on income tax.

Who Can Apply?

Any married couple or registered civil partners can apply to use this tax break. It is estimated that more than 4 million married couples and 15,000 civil partnerships will be eligible as of 6th April 2015.

The only restriction is that one partner earns below the basic threshold and the recipient partner must not pay more than the basic rate of tax (20%).

How Do I Claim It?

Registration is now open to claim this Allowance online at: gov.uk/marriageallowance

It is the spouse or partner that is earning below the basic rate threshold that should apply.  From April, HMRC will contact anyone who has registered for the Marriage Allowance.  HMRC will then inform the partner or spouse who will receive the additional threshold and their Pay as You Earn (PAYE) code will be updated accordingly.

When Do I Need to Do This?

The Allowance is available from 6th April 2015 for the 2015/16 tax year.  Registration to claim this relief is now open, however, there is no need to do so before April.  People can register at any time throughout the tax year and still receive the full benefit.

For any further information on this or any other tax issues, contact Sarah-Jane or any other member of our tax team and they will be delighted to advise you.

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