We are trying to figure out if there are any tax reliefs they can get to reduce taxable income. They have been married since August 2023 and were born after 6 April 1935. Can the marriage allowance be claimed?
A.) Since being introduced in the 2015/16 tax year, the ‘Marriage Allowance’ – not to be confused with the ‘Married Couples’ Allowance’ – has enabled spouses and civil partners the option to transfer part of their income tax personal allowance to their spouse or civil partner.
As mentioned above this is different to the Married Couple’s Allowance (mca). The MCA is a tax reducer compared to the Marriage Allowance being a transfer of a personal allowance.
It allows couples to reduce their tax bill by between £427 and £1,108. It is, however, not available to all, as this is only applicable if one of the spouses/civil partners were born before 6th April 1935.
The Marriage Allowance is therefore a viable alternative. To note, if the MCA is being claimed, the marriage allowance cannot also be claimed.
Opportunities
The marriage allowance is often overlooked and is an opportunity to make use of the personal allowance to ensure it isn’t wasted. An overwhelming amount of couples are not making use of this whilst they could be reducing their tax by up to £252 in the tax year. It can be seen as a use or lose it scenario.
There are many instances where it could be used. Do you have any clients who are on maternity leave? This is an excellent opportunity, even if it is used for 1 tax year. This also suits well to those working part time or receiving a pension below the personal allowance threshold.
As set out in ITA 2007, s. 55B(4), the legislation permits up to 10% of a spouse’s or civil partner’s unused personal allowance to be transferred. The marriage allowance is set at £1,260 and will remain at this level until 6 April 2028 due to the freezing of the personal allowance.
Whilst 10% of a personal allowance doesn’t give rise to a substantial amount of tax relief. Did you know this can be backdated for up to 4 tax years – if the conditions are met during these years – which can be beneficial to those previously unaware to this relief. This could lead to a sum of £1,220 over 4 years, which is quite the sum considering the cost-of-living crisis. Why miss out?
Availability and conditions
Regarding how the marriage allowance is applied, ITA 2007, s. 55A provides that the transferred allowance is given as a deduction from an individual’s income tax liability.
The availability of the allowance is conditional several requirements which are detailed in ITA 2007 S55B: Below is a rough summary of these:
a. the individual is the gaining party (see section 55C(1)(a))
b. the individual is not, for the tax year, liable to tax at a rate other than the basic rate
c. the individual meets the requirements of section 56 (residence) for the tax year, and
d. neither partner makes a claim for MCA in the tax year
Once these conditions are fulfilled, ITA 2007 s55C lays out the conditions that need to be met for an individual to make an election to reduce their personal allowance. This follows similar requirements as seen above but instead from the point of view of the party reducing their allowance. Additionally, once the claim is made, it will be automatic for each tax year going forward.
PAYE code
It important to note that once the client is in receipt of the marriage allowance, their tax code should change in line with this. The recipients code changes to ‘M’ and the partner who transferred part of the allowance will see their code change to ‘N’ (this is dependent on them being in employment or receiving a pension).
Marriage/separation part way through the tax year
Regarding being married for part of the tax year, the marriage allowance can still be claimed as noted above. The marriage allowance is available in full if the other conditions are met for the year in which a marriage or civil partnership takes place. This is laid out in ITA 2007 S55.
Additionally, if you were to separate from your spouse or civil partner in a tax year, the marriage allowance is still available in full for that year if the conditions are met. The election must have been made prior to the separation. It is not possible however to claim the allowance after divorce or dissolvement of a civil partnership.
Death
Where there has been a death within the couple, the allowance is available as if the marriage or civil partnership had continued until the end of that tax year. There is no reduction in the marriage allowance in the year of death. This can also still be backdated 4 years. To receive the backdated amount you can apply online or phone the HMRC Income Tax helpline.
Useful websites
There is a helpful calculator on the HMRC website which could be useful when understanding how much a couple could benefit from. Where the non-taxpayer earns between £11,310 and £12,570 there is a chance the couple might not benefit from the marriage tax allowance due to how tax is calculated. Therefore, checking beforehand is recommended.
To note though this does not include allowances such as personal savings allowance or dividend income.
Eligibility Criteria – Marriage Allowance – GOV.UK (tax.service.gov.uk)
The marriage allowance itself can be applied to following this link:
Apply for Marriage Allowance online – GOV.UK (www.gov.uk)
The marriage allowance can be stopped through this link:
https://www.gov.uk/marriage-allowance/if-your-circumstances-change
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