Married couples and civil partners in the UK could be missing out on a £252 annual tax saving through the Marriage Tax Allowance, with HMRC reporting that around two million eligible people fail to claim the benefit. The allowance, which can be backdated for up to four years, means qualifying couples could reclaim more than £1,000 in total, according to the Express.
Who qualifies for the Marriage Tax Allowance?
To be eligible, applicants must be married or in a civil partnership and both partners must have been born on or after 6 April 1935. One partner must be a non-taxpayer, earning below the personal allowance of £12,570. The scheme allows the lower-earning spouse or civil partner to transfer £1,260 of their tax-free personal allowance to the higher-earning partner, generating a standard saving of £252 per year—20% of the transferred amount.
For the full benefit to be realised, the non-taxpayer should earn £11,310 or less. However, couples should be cautious: if the non-taxpayer earns between £11,310 and £12,570, they may not gain from the allowance and could even lose money due to how the tax is calculated. HMRC advises verifying eligibility before the non-taxpayer submits an application.
How to claim and potential pitfalls
Applications can be made online, but claims for previous tax years must be submitted by post, as online backdating is not available. If a claim for earlier years is approved, the funds are typically paid by cheque or bank transfer. Once the allowance is transferred, no reapplication is needed, but couples must cancel it if their relationship ends or if the higher-earning partner becomes a higher or additional rate taxpayer, as the benefit is then forfeited.
There is also a risk of being worse off if the non-taxpayer earns just below £12,570 and the basic rate taxpayer earns just above that threshold. The non-taxpayer must transfer 10% of their allowance in full, meaning they will pay tax on any income above £11,310. If the basic rate taxpayer earns over £13,830 per year, they will save 20% tax on the full transferred amount. However, if the 20% taxpayer earns below £13,830 and the non-taxpayer earns just under £12,570, the non-taxpayer may end up paying more tax than the taxpayer saves.
Impact and next steps
Given the potential financial benefit, eligible couples are encouraged to check their eligibility and apply. The process can be completed online, and backdated claims could provide a significant lump sum. However, careful consideration of both partners' incomes is essential to avoid an unfavourable outcome.
