When assessing your liability to income tax, much will depend on the extent of any personal allowance that you’re entitled to claim for the relevant tax year. If you’re either married or in a civil partnership, your spouse or civil partner may be able to transfer part of their allowance to increase your tax-free threshold, or vice versa, by claiming “marriage allowance”.
Below we examine the rules relating to marriage allowance, and the circumstances in which this type of allowance can be used to reduce a couple’s overall liability to income tax.
How does marriage allowance work?
Marriage allowance, also referred to as “marriage tax allowance”, works by allowing the spouse or civil partner who doesn’t pay income tax, or earns less than their personal allowance so isn’t liable to tax, to transfer part of that allowance to the higher earner. In this way, this increases the amount of income that their husband, wife or partner doesn’t pay tax on, and therefore reduces the amount of tax paid on the combined household income.
For the tax year 2023/2024, the standard personal allowance is £12,570. This is the amount of income an individual can receive without having to pay any tax. Any unused allowance cannot be carried forward into the following tax year, but part of this amount can be transferred to a spouse or civil partner if the couple is eligible to claim marriage allowance.
Who can claim marriage allowance?
To benefit as a couple from marriage allowance you must meet certain criteria:
- you must be married or in a civil partnership – unmarried, cohabiting couples do not qualify
- the income of the lower earner must fall below the applicable personal allowance
- the income of the higher earner must be taxed at the basic rate, where they’re not liable to tax at either the higher or additional rate
The lower earner could be employed, self-employed or not working at all, whilst the higher earner can be either employed or self-employed, provided they’re not paying more than the basic rate. In a nutshell, one must be a non-taxpayer and one must be a basic-rate taxpayer.
How much is marriage allowance?
If you’re eligible as a couple to claim marriage allowance, the lower earner with an unused amount of personal allowance can transfer the sum of £1,260 to their spouse or civil partner. The higher earner will therefore benefit from their full personal allowance, together with this extra 10% (rounded up), so £12,570 plus £1,260, totalling £13,830 tax-free income.
Applying the basic rate of 20%, the net effect of marriage allowance is therefore to reduce the higher earner’s liability to income tax by up to £252 (20% of £1,260).
How is marriage allowance calculated?
Marriage allowance is calculated by increasing the higher earner’s tax-free allowance by £1,260 but, at the same time, reducing the lower earner’s allowance by the same amount. As the lower earner must transfer the full £1,260, if their new personal allowance of £11,310 (£12,570 – £1,260) is lower than their income, they might have to pay some income tax themselves, although there may still be some noticeable benefit to you both as a couple.
For a lower earner whose income is way below the personal allowance threshold, this will not expose them to any personal liability to income tax, and their spouse or civil partner will benefit from the maximum £252 tax saving. However, if the lower earner has an annual income of more than £11,310, marriage allowance becomes less beneficial. This means that where the lower earner is near the £12,570 tax-free threshold, as a couple you must look carefully at the tax gain and loss each of you would have before claiming marriage allowance.
If your spouse’s annual income is £11,500, they’ll not be liable to pay any income tax, as their earnings fall below the tax-free threshold of £12,570. In contrast, if your annual income is £20,000, you’ll be liable to pay tax on the sum of £7,430 (£20,000 – £12,570). This is known as your “taxable income”. As a couple, you’ll therefore be paying income tax on a total of £7430.
If your partner transfers £1,260 of their personal allowance over to you, their personal allowance will reduce to £11,310, but you’ll get a “tax credit” on £1,260 of your taxable income. Even though this means that your partner will now pay tax on £190 of their earnings (£11500 – £11,310), you’ll only pay tax on £6,170 (£7430 – £1260). As a couple, this means you’ll be paying income tax on a total of £6,360 (£6,170 + £190) rather than £7430.
Overall, as a couple, you’ll benefit from marriage allowance in these circumstances because rather than paying tax on the sum of £7430 (20% of £7430 = £1486), you’ll only be paying tax on £6,360 (20% of £6360 = £1272), which will save you a total of £214 (£1486 – £1272).
How do you claim marriage allowance?
HMRC will not apply marriage allowance automatically to eligible married couples or civil partners. This means that an application must be made to HMRC, although it’s free to apply. The application should be made by the lower earner or non-tax payer.
An application can be made online or in writing, or where registered for self-assessment through their self-assessment return. The applicant will need two documents as proof of identity, such as payslips, previous self-assessments and a passport. They’ll also need to provide both their own and their spouse or civil partner’s National Insurance number.
If the application is successful, HMRC will adjust the tax codes of both the recipient and the individual transferring their allowance, backdating these to the start of the tax year.
How far can marriage allowance be backdated?
Many eligible couples miss out on claiming marriage allowance, often because they aren’t aware of their entitlement. However, an application can be made to backdate a claim for up to 4 years.
Payouts for backdated years will be made by either bank transfer or cheque.
However, you must meet the criteria for each year you apply, where the tax-free threshold for non-taxpayers and basic-rate taxpayers can slightly differ. This also means the amount of marriage allowance that could be transferred, and the maximum tax saving that could be made, also differs depending on the year in question.
Once the lower earner has successfully applied to transfer their personal allowance for the benefit of their spouse or civil partner, they’ll not need to re-apply. The allowance will transfer automatically every year, unless and until your circumstances change, for example, if the lower earner starts to earn over the personal allowance threshold or your relationship ends.
Cancelling marriage allowance
If a couple’s circumstances change, their marriage allowance may need to be cancelled. You’ll need to notify HMRC if any of the following apply:
- your relationship ends, for example, if you’ve got divorced, you’ve dissolved your civil partnership or you legally separate
- your income changes and you’re no longer eligible for marriage allowance, for example, the lower earner’s income exceeds the personal allowance or the higher earner’s income falls into a higher tax band, or
- you no longer want to claim.
If you need to cancel your marriage allowance claim because your relationship has ended, either you or your spouse or civil partner can cancel. If you’re cancelling for any other reason, the person who made the claim must cancel. You can cancel marriage allowance online or by telephone. You’ll be required to prove your identity using information HMRC holds about you.
If you cancel because of a change in income, the allowance should run until the end of the tax year. If your relationship has ended, any adjustment may be backdated to the start of the tax year. This might mean either you or your partner underpays tax for the year, where HMRC will recover any tax owing by adjusting your tax code or adding this to your self-assessment bill.
What happens to marriage allowance on death?
If your spouse or civil partner passes away after you’ve transferred part of your personal allowance, their estate will be treated as having the additional amount and your personal allowance will go back to normal. For example, if your income is £8,000 and you transferred £1,260 of your allowance to your partner, this will have made your allowance £11,310 and put their allowance at £13,830 (£12,570 + £1,260). After their death, the personal allowance of the deceased’s estate stays at £13,830 and yours will go back to £12,570.
In contrast, if your spouse or civil partner transferred some of their personal allowance to you before they died, your allowance will remain at the higher level until the end of the tax year and their estate will be treated as having the smaller amount. For example, if your husband/wife transferred £1,260, this will have made their personal allowance £11,310 and yours £13,830. After their death, your allowance stays at £13,830 until 5 April, and then goes back to normal, and their estate is treated as having a personal allowance of £11,310.
What is the married couple’s allowance?
If you or your spouse or civil partner was born before 6 April 1935, you might benefit more as a couple from the married couple’s allowance. Unlike marriage allowance, the married couple’s allowance doesn’t reduce the amount of your taxable income, but rather it reduces the recipient’s tax liability by 10% of the allowance they’re entitled to. Tax reductions can be between £401 and £1,037.50 a year.
You can only claim married couple’s allowance if you’re either married or in a civil partnership, living together and one of you was born before 6 April 1935. For marriages prior to 5 December 2005, the husband’s income is used to calculate the allowance, although this can be transferred to the wife. For marriage and civil partnerships after this date, the income of the highest earner is applied.
If you and your spouse or civil partner were born on or after 6 April 1935, you will need to claim marriage allowance instead. You cannot get both allowances at the same time.
Marriage allowance FAQs
What is the income limit for married couples allowance?
There are upper and lower limits for how much can be earned and the amount of tax that can be claimed. For 2021-22, married couples allowance could cut your tax bill between £353 and £912.50 a year.
What is tax marriage allowance?
Tax marriage allowance refers to the amount that a spouse or civil partner can transfer to their other half to reduce the amount of tax that they’re liable to pay on their income.
What is the difference between marriage allowance and married couples allowance?
Marriage allowance and married couples allowance are two different tax treatments that can help married couples reduce their combined income tax liability, although the latter is only available where at least one spouse was born before 6 April 1935.
What happens to marriage allowance if you divorce?
If a couple divorce their entitlement to marriage allowance will come to an end, where the necessary adjustment may be backdated by HMRC to the start of the tax year.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal or financial advice, nor is it a complete or authoritative statement of the law or tax rules and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert professional advice should be sought.