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Many people are unaware of the significant tax savings available to husbands, wives and civil partners through marriage allowance.

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What is Marriage Allowance?

You will be allowed to transfer 10% of your personal allowance. For the tax year 2016/17 this will be £1,100.00 of your personal allowance which is tax free to your husband, wife or civil partner if they earn more than you – This will not apply if you simply live together.

Benefits

Your personal allowance will be reduced to £9,900, and your partner’s allowance would increase to £12,100. This will mean that your partner would be able to able to reduce their tax by up to £220.00 for the year as long as they are a Basic Rate taxpayer in 2016/17.

Eligibility

  • You must have an income of £11,000 or less
  • You must be married or in a civil partnership
  • Your partners income is between £11,001 and £43,000

You can still apply for Marriage allowance if you or your partner are currently receiving a pension, living abroad – but you are entitled to your personal allowance.

> Check if you meet the criteria

Backdated Marriage Allowance

If you were eligible for Marriage Allowance in the 2015 to 2016 tax year then you will be able to backdate your claim to 6 April 2015. You would have been allowed to transfer £1,060 (10%) to your partner. This will mean your partner will be able to reduce their tax by up to £212.00.

When will you receive a change of tax code?

Providing your application is successful, your personal allowance would be backdated to the start of the tax year and it can take up to 2 months.

Do you have to apply for the marriage allowance every year?

You won’t be required to apply for this every year. It will automatically transfer to your partner unless one of you cancels the marriage allowance or if your circumstances changes.

Changes to your circumstances

If there are changes to your circumstances, you or your partner can cancel this online. You will also need to prove your identity.

If you were to stop transferring your personal allowance, then it will run until the end of the tax year. If your partner requests to stop receiving your allowance, then HMRC will backdate this to the tax year you first started transferring it.

Divorce or dissolving a civil partnership

You will have two options:

    • You can either keep transferring your personal allowance until the end of the tax year
    • Backdate the change to the start of the tax year.

If you decide to stop transferring your allowance, it will run until the end of the tax year (5 April).

What to do if your partner passes away

In the situation where you have transferred your personal allowance and your partner passes away, their estate will still take into consideration the increase personal allowance and your personal allowance will go back to the normal amount.

E.g. You have an income of £9000, you transfer £1,100 to your partner so your personal allowance is £9,900 and your partners allowance is £12,100. After their death, your personal allowance will return to £11,000, and your partners will remain at £12,100.00.

To learn more about marriage allowance and the the benefits available to you through setting up a limited company, contact us today.