Did you know that if you’re married or in a civil partnership you can share your personal allowance to a certain degree? Here’s how the Marriage Allowance works.
If one person in the relationship earns less than their personal allowance (£11,850 for the 2018/19 tax year) they can transfer up to 10% (£1,190 for the 2018/19 tax year) of this allowance to their higher earning partner. This way the partner can make a tax saving at the basic rate (currently 20%) on this amount which is currently up to £238 (again for the 2018/19 tax year).
Conditions for Marriage Allowance
There are three conditions that have to be met, however. These are:
- The couple has to be married or in a civil partnership.
- The partner transferring their allowance must earn less than the personal allowance for the relevant tax year or have no income
- The partner receiving the allowance has to be in the basic rate income tax bracket. This means earning more than the personal allowance and currently less than £46,350 (or £43,430 if you’re in Scotland).
If you’re born before 1935 and already receive the Married Couple’s Allowance, you cannot also apply for the Marriage Allowance.
Receiving a pension or living abroad will not make a difference. You can still transfer the allowance.
To apply for this, you have to register your interest online on the HMRC website and have an email account.
What happens if your circumstances change?
If your spouse dies during the tax year, you can still claim Marriage Allowance.
Death of the higher earning spouse during the tax year may have the effect that you’re now eligible to claim Marriage Allowance. The higher earning spouse might have been just outside the basic income tax bracket in life. Due to his or her death they are now within the basic rate tax bracket for that year.
On the other hand, if the lower earning spouse passes, and due to their death earns less than the personal allowance during the tax year, they are now eligible to transfer the balance to the higher earning spouse if all other conditions are met.
To find out how divorce affects Marriage Allowance, please get in touch.
The claim can be backdated up to 4 years.
Should you have any other questions regarding Marriage Allowance, or indeed, Married Couples Allowance (if you’re born before 1935) please get in touch. We are always happy to help and explain all your options. You can call us on 01509 853779 or reach us via email at admin@alba.uk.com .